No, WallStreetBets isn’t robbing Wall Street to help the little guy



There’s just one problem: the billions of dollars in new “wealth” people have supposedly gained is mostly in the form of inflated GameStop stock. Before they can actually use that wealth, they need to convert it to cash. And if a lot of people start selling their shares, the stock will crash. Most of that GameStop “wealth” will evaporate, with many shareholders getting a fraction of the value they expected.

Meanwhile, if GameStop’s stock price starts to fall, short sellers will start to make money. Any short sellers who maintained their short positions through the bubble will make back most of what they lost.

Sooner or later, GameStop’s stock is going to return to normal levels. And when it does, we are likely to find that little wealth was actually transferred from wealthy hedge fund investors to the general public. Short losses as the stock appreciated will be largely balanced out by short gains as the stock falls. The gains of GameStop shareholders as the stock appreciates will be balanced by losses as the stock declines.

Author(s): TIMOTHY B. LEE

Publication Date: 29 January 2021

Publication Site: Ars Technica