Welcome to GameStop: may we take your order‪?‬ Finance & Fury Podcast

Welcome to Finance and Fury. In this episode, we're going to cover the GameStop saga. It's still ongoing at the time of recording this, so new information may be out by the time you listen.
I wasn’t going to cover this topic – I saw this first pop up either Monday or Tuesday last week – looked like a funny story – retail traders sticking it to hedge funds – but has evolved over the last week to something much more – and has been making headlines everywhere – in this episode – want to give a quick recap about what is going on, between the initial rise of the GME shares, the market interference by Robinhood, why this went on and the greater market implications, looking at short selling and hedge funds in general – so lots to covers  
To start with – what is the GME story -
GameStop – GME – brick and mortar game retailer – owns EB games GME price history – Over the years brick and mortar retails have lagged behind – Steam, amazon, many online gaming services – Back in 2013 the price was around $50 USD – by the end of 2015 – trended down to $35, 2017 was in the $20s, then by the start of 2020, was around $4 – then with the lockdowns – many people thought this would be the final nail in the coffin – go the way of blockbuster – Many things have happened since them that are positive for the company – new billionaire investors/board members who have come aboard with expertise in e-commerce – which is where gamestop needs to head to survive – then new PS5 and Xbox came out – prices started to go up – but funds stared to double down on shorting positions – So by the start of 2021 – there were around 71 million short positions taken – to put this into perspective – GME only has around 70 million shares – but around 20% of these shares are owned by insiders (CEOs, board members, etc.) – on top of this – managed funds and indexes own a large chunk as well – this takes the number of available for trade down to around maybe 30 – 40 million Short selling – if you think the price of a company is too high or is going to go down – or is already trending downwards – you profit off this through ‘shorting the share’ You borrow the share off a broker or market maker – you then sell that share – taking the cash – you then wait – and if the price goes down – you buy the share back at a lower price, return that share from the lender and make a profit in the difference – As an example – Share A is trading at $2, I think it will go down – so I log into my brokerage account and apply for a shorting position – some fund which wants to hold this company for a while will then lend me this share, I sell it – then a few weeks later the price goes to $1 – I buy this share, return it to the fund and make a profit of $1 However – the net profit will technically be minus the borrowing costs – this is what can make this trade very risky – the fee to do this may normally be a few percentage points to the lower end of 1% - for some large companies is about 0.5% - so off this trade I will pay $0.1 so have made a $0.9 profit – still not bad But - Say you short a share – and the price goes up – well, why not just hold on for a long time and wait, hope and pray that the price comes back down at some point? Well – because you have to pay an ongoing fee for this – the fee is dependent on a number of factors and will change over time – but lets just say, that if the prices goes up – this fee gets larger This makes shorting closer to gambling in the short term that you are correct on your position - That is what shorting is in a nutshell – So as a quick recap - hedge funds were shorting GME – price started to go up – the hedge funds doubled down to the point there were around twice the number of shorted positions to available for purchase shares – People on Wallstreetbets realised this – companies like Melvin cap