From what I understand of the situation (which admittedly isn’t much, I’m not an economist or into the stock market) is that these Hedgefunds are using this process called Short Selling where they “borrow” stocks from a company with the promise they’ll pay the stock’s price back later. Now they’re betting the company will fail, and the stock price will go down, so they can make money. An example is let’s say Hedgefund A borrows one stock from Company B, and the stock’s current price is $5.00. Then Hedgefund A sells this stock to person C for $5.00. Hedgefund A has promised Company B that they will repay the value of the stock soon, so Hedgefund A is betting the stock price lowers. Because if the stock price for Company B drops from $5.00 to $1.00, Hedgefund A only owes Company B $1.00, so Hedgefund A makes a $4.00 profit. However, if the stock price for Company B increases to $8.00 for example, Hedgefund A now owes Company B $8.00 and only made $5.00 from the stock they burrowed, so they need to pay the other $3.00 with their own money. Now that the explanation of what the Hedgefunds are doing, from what I understand, Hedgefunds have been short selling GameStop stocks while their price was low, in the hopes that the stock price goes down further so they can make a profit, however the people of r/WallstreetBets have artificially inflated the stock price by investing, so now the Hedgefund owes a ridiculous amount of money. This could also be related to the Media, as they’ve been known to report on “This company is failing!” Which leads to everybody selling their stocks, which lowers the price. This then leads to the Hedgefund buying up all the stocks for dirt cheap, the Media then saying “This company is actually going to do alright now!” Which leads to the people buying the stocks at a raised value, netting a profit for the Hedgefunds. Hope this helps and isn’t too long of an explanation! :)
