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Matt Levine

Congress Wants to Talk About GameStop

Also a GameStop lawsuit and a GameStop corporate equity derivatives strategy.

Remember GameStop? GameStop Corp. common stock started the year at $18.84; at the end of January it briefly traded as high as $483 because people on Reddit’s r/WallStreetBets forum bought a lot of it. There were call options and gamma squeezes and short squeezes; brokerages restricted trading in the stock as it got so volatile that it blew up their clearinghouse margin; we all had a good time. Then it ended. GameStop closed yesterday at $45.94. Oh well. Never mind.

The whole thing was interesting and often very funny, but I do not think it was very important. Sometimes stocks trade at the wrong price for a while; sometimes there are bubbles and pumps and short squeezes; sometimes everybody sees the bubble happening in real time but no one can stop it. When this happens, people lose money, and people lost money on GameStop. But the people who lost money on GameStop seem to have been mostly (1) sophisticated hedge fund professionals who made reasoned risky bets that did not work out and (2) people who made self-consciously risky dumb gambles after reading r/WallStreetBets and pretty much got the gamble they paid for.