GameStop’s shares were at the center of the 2021 short squeeze that roiled stock markets.
In January 2021, GameStop’s share price rose dramatically as many individual investors bought shares and options, discussing the company on online forums including Reddit’s WallStreetBets. At the same time, hedge funds and other traders had built substantial short positions, betting that the price would fall.
As the stock climbed, some short sellers bought shares to close their positions. That buying added pressure to the price, creating a short squeeze. Brokerage firms then restricted some purchases because of clearing and collateral requirements, intensifying the public controversy and congressional scrutiny.
GameStop was not the only heavily shorted stock involved in the episode. AMC Entertainment and several other companies also experienced sharp, socially driven rallies. The event differed from a broad market crash: it centered on particular securities and highlighted the influence of online communities, options trading, payment-for-order-flow arrangements, and settlement risk.