Enlarge / A closed GameStop store in Frankfurt, Germany, on Friday, Jan. 29, 2021. (credit: Alex Kraus/Bloomberg via Getty Images)
You’ve probably seen stories about GameStop, the struggling video game retailer that has improbably seen its stock quintuple since the start of the week. The stock isn’t up because GameStop announced strong financial results or a new turnaround strategy. Instead, it was the focus of a coordinated buying campaign by members of the WallStreetBets subreddit.
The effort has been so effective in part because its architects have convinced people that it’s not just a pump and dump scheme. Instead, they’ve painted a seductive story in which retail investors found a loophole that allows them to make money at the expense of hedge funds and other wealthy investors who had shorted the stock.
In reality, most of the gains captured by early GameStop investors will come at the expense of later investors who will be left holding the bag when the stock falls.
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