By January 2021, hedge funds had sold short roughly 140 percent of GameStop’s public float, a number made possible because the same shares were lent out again and again. This episode explains how that structural trap was sprung. Michael Burry and Chewy co-founder Ryan Cohen took stakes in the struggling retailer, and Keith Gill, posting as Roaring Kitty, argued for months on Reddit’s WallStreetBets that the stock was undervalued. When retail traders piled into cheap call options, market makers were forced to buy shares to hedge, and the price leapt from about 17 dollars to more than 500.

The story then turns to January 28, when Robinhood and Webull disabled the buy button. The cause was not a rescue of hedge funds but a collateral demand from clearinghouses worried about the two day settlement cycle. The restriction crashed the price, united politicians from opposite ends of the spectrum in outrage, and prompted lawsuits and congressional hearings. The episode closes with the uncomfortable accounting of who actually came out ahead.

• Keith Gill invested about 53,000 dollars in GameStop call options in the summer of 2019. By January 27, 2021, the position was worth 48 million dollars.
• Melvin Capital lost 53 percent of its asset value and needed a 2.75 billion dollar cash injection from Citadel and Point72. Short sellers lost an estimated 6 billion dollars overall.
• The frenzy spread to other heavily shorted names: AMC rose 480 percent, BlackBerry doubled, and headphone maker Koss surged more than 3,700 percent.
• GameStop lost 60 percent of its value on February 2 alone after buying was restricted, eventually shedding 80 percent from its peak.
• Institutions were among the biggest winners. Senvest Management made a 700 million dollar profit, and BlackRock’s stake swelled to 2.6 billion dollars at the peak.