GameStop Short Squeeze

A short squeeze occurs when a heavily shorted stock rises in price, forcing short sellers to buy shares to close their positions, which pushes the price even higher in a self-reinforcing spiral. The GameStop short squeeze of January 2021 was a dramatic example: approximately 140 percent of GameStop's public float had been sold short, leaving short sellers acutely exposed when buying pressure mounted. At its peak on January 28, 2021, the stock reached a pre-market value exceeding US$500 per share (about $125 split-adjusted), roughly 30 times its valuation at the start of the month.

The squeeze was largely driven by retail investors coordinating on Reddit's r/wallstreetbets, who bought shares and call options to counter institutional short positions, inflicting billions in losses on several hedge funds. The frenzy spread to other heavily shorted "meme stocks" such as AMC and BlackBerry. When brokerage Robinhood and others restricted buying of the affected stocks at the height of the volatility, it triggered public outrage, lawsuits, congressional hearings, and a detailed SEC staff report examining the event. The episode became a landmark case study in retail-investor coordination, market structure, and the influence of online communities on financial markets.