GameStop doubles as losing hedge funds retreat

GameStop is in the middle of an epic Wall Street tug-of-war.

On one side: professional traders, known as short-sellers, who are betting shares of GameStop will fall.

On the other: amateur investors, who are betting shares of the gaming retailer will continue to scale unbelievable heights.

And, so far, the amateurs are wiping the floor with the professionals.

Shares of GameStop doubled again on Wednesday, catapulting the stock price by 800 percent over the past two weeks.

The stock has been on a tear ever since GameStop appointed three e-commerce veterans to its board earlier this month.

Short-sellers, traders who make their money by betting a stock will fall, saw the stock going up and expressed their disbelief.

Last week, Citron Research uploaded a video alleging GameStop is a "failing mall-based retailer" and tweeted the stock would nosedive back to $20.

Amateur investors who disagree flocked to social media sites like a Reddit message board to defend the stock, amassing a horde of supporters who pushed the stock higher.

The battle reminds Jeff Tomasulo, CEO of Vespula Capital of the dot-com frenzy of the 1990s, with social media providing a new twist.

"There are these groups, right? On Reddit is one group that starts to talk about certain stocks. So people are in these trading groups or these communities pushing the certain stocks, right? And then you have Robinhood, which is where you can, you know, a brokerage where you can buy fractional ownership, where you couldn't do this (before). So now you have just a bunch of money flowing in to these different stocks because these communities, they're saying they're really good buys and it's really just money pushing in."

Even Tesla CEO Elon Musk, who's had his own bitter battles with short-sellers, weighed in - seemingly on the side of the amateurs. After Tuesday's market close, he tweeted out a link to the Reddit message board that's hyping the GameStop stock.

The controversy doesn't appear to be letting up. GameStop shares touched $350 a share on Wednesday. Some of the professional investors who bet on the stock's demise have thrown in the towel. Citron Research, the firm that said GameStop was going to $20, said Wednesday it closed out the majority of its losing bet the day before.

Video Transcript

- Gamestop is in the middle of an epic Wall Street tug-of-war. On one side, professional traders known as short Sellers who are betting shares of GameStop will fall. On the other, amateur investors who are betting shares of the gaming retailer will continue to scale unbelievable heights. And so far, the amateurs are wiping the floor with the professionals.

Shares of GameStop doubled again on Wednesday, catapulting the stock price by 800% over the past two weeks. The stock has been on a tear ever since GameStop appointed three e-commerce veterans to its board earlier this month. Short sellers, traders who make their money by betting a stock will fall, saw the stock going up and expressed their disbelief.

Last week, Citron Research uploaded a video alleging GameStop is a, quote, "failing mall-based retailer" and tweeted the stock would nosedive back to $20. Amateur investors who disagree flocked to social media sites like a Reddit message board to defend the stock, amassing a horde of supporters who pushed the stock even higher.

The battle reminds Jeff Tomasulo, CEO of Vespula Capital, of the dotcom frenzy of the 1990s, with social media providing a new twist.

JEFF TOMASULO: There are these groups, right, on Reddit one-- is one group that, you know, starts to talk about certain stocks. So people are in these-- these trading groups or these communities pushing these certain stocks, right?

And then you have Robinhood, which is where you can-- you know, a brokerage where you can buy fractional ownership where you can do this. So now, you have just a bunch of money flowing in to these different stocks because these communities they're saying they're really good buys, and it's really just money pushing in.

- Even Tesla CEO Elon Musk, who's had his own bitter battles with short sellers, weighed in seemingly on the side of the amateurs. After Tuesday's market closed, he tweeted out a link to the Reddit message board that's hyping the GameStop stock. The controversy doesn't appear to be letting up.

GameStop shares touched $350 a share on Wednesday. Some of the professional investors who bet on the stock's demise have thrown in the towel. Citron Research, the firm that said GameStop was going to $20, said Wednesday it closed out the majority of its losing bet the day before.