The big GameStop short: Reddit traders outmaneuver US hedge funds

Established US investment funds Melvin Capital and Citron Research bet that stock prices of an aging video game high-street retailer would keep falling. But Reddit users teamed up to confound their short positions.

The tables turned on Wall Street as Reddit traders continued to push up stock prices from the aging US video games high street store chain GameStop on Wednesday.

Established US investment funds Melvin Capital and Citron Research had placed bets for money-losing GameStop's stock to continue to fall.

Amid the advent of online gaming platforms like Steam and the trend of people buying and downloading their new video games directly, rather than buying a physical copy in a store, few stock market bets appeared to be safer.

But, despite no real change in the company's precarious position, GameStop shares have been on a meteoric climb from just $18 (around €15) a few weeks ago to a high of $380 on Wednesday.

This has been driven by large numbers of non-professional traders, known as retail investors, supporting each other on Reddit threads such as r/ wallstreetbets.

How much money did the funds lose?

Citron Research acknowledged Wednesday in a YouTube video that it unwound the majority of its bets against GameStop's share price, taking "a loss, 100%" to do so.

Melvin Capital is also pulling its resources from short positions on GameStop shares, with manager Gabe Plotkin telling US broadcaster CNBC that the hedge fund was taking a significant loss. He rejected rumors that the backfired trades posed an existential threat to the fund.

Melvin Capital accepted some $2.75 billion (€2.27 billion) in investments from two other groups, in what was seen as an