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What does Elon Musk have to do with the share price of GameStop?

It’s the underdog tale involving $91 billion, a gaming retailer, an unlikely group of subreddit trolls and the world’s richest man, Elon Musk.

What does Elon Musk have to do with the share price of GameStop?
HANNIBAL HANSCHKE REUTERS

Tuesday evening the stock market closed with gaming retailer GameStop’s stock up more than 92%, or around $148 a share, continuing a runup - sharp, short-term increase in a stock’s price – for the fourth session in a row.

WallStreetBets: why has GameStop enjoyed a recent price hike?

GameStop’s unlikely runup has seen its share price rise by more than 680% this month alone, an unexpected spike owing to investors gathering on the WallStreetBets subreddit. Traders congregating in the chatroom have essentially declared war on GameStop’s "short sellers", say CNN. So the more GameStop’s stocks rise, the more money the short sellers lose.

The Reddit traders are also piling onto other struggling companies that short sellers tend to see as overvalued, including BlackBerry (BB), Bed Bath & Beyond (BBBY), Macy's (M) and AMC (AMC).

What is short selling?

In short… it’s the practice of betting against the success of the company - or betting that its stocks will go down in price. A vote of no confidence, in other words.

According to CNBC, the market’s relentless rally has not been kind to short sellers for many years. For all the attention that superstar short sellers get in the industry, most of these managers lose money. Equity shorts lost $243 billion in 2020, a return of negative 26% and his month, their performance is even worse. In January alone, they are down $91 billion, according to S3 Partners.

What does Elon Musk have to do with the GameStop price?

Tesla and SpaceX CEO and the current richest man on the planet tweeted out Tuesday evening to his 43.1 million followers one simple word: “Gamestonk!!”

The tweet was enough to boost the retailer’s stock even further, egging on the alsready frenzied Reddit trolls, and GameStop’s share price briefly surpassed $200 following market closure Tuesday.

Musk’s influence on the stock market via social media was further proven when after he sent Etsy stock into a premarket spike Tuesday by declaring that he “kinda” loves the online marketplace.

Who are GameStop?

GameStop is a Texas-based video game, consumer electronics and gaming merchandise retailer. It operates 5,509 retail stores throughout the US, Canada, Australia, New Zealand and Europe. It trades as NYSE:GMO in the S&P 600 index.