Counter- 

 
 

Hegemonic   
 

Finance: ​The   

Gamestop Short 
 
 

Squeeze 
 
 

   
 
 
 
 
 
Dr. Usman W. Chohan 
 
28 January, 2021 
Abstract 
 
 
 
The events that surrounded the short squeeze of 
Keywords: ​short squeeze, gamestop, reddit, 
various downtrodden stocks such as Gamestop  wall street, financial democratization 
(GME) allude to a counter-hegemonic financial   
effort, with small-scale investors pooling in to   
sabotage the short-positions of large Wall Street     
players such as hedge funds. This paper frames 
these events in terms of public reprisal for the 
2008 Global Financial Crisis (GFC) and public 
contempt for insular financial private interest. The 
discussion suggests that such people-power 
initiatives, abetted by powerful elite 
sympathizers, have a powerful signalling effect 
on the public in terms of highlighting fundamental 
vulnerabilities in an extractive financial system. 
 
 
 
 
 
 

Electronic copy available at: https://ssrn.com/abstract=3775127

Counter-hegemonic Finance:   increased the stock price almost 900 times 
from its record low, hitting a high of $500 per 
The Gamestop Short Squeeze 
share on January 28, 2021, which did succeed 
  in inflicting hemorrhaging losses for short 
sellers. 
 
This paper briefly examines the underlying 
The events that surrounded surrounding the 
counter-hegemonic element , along other 
Gamestop (ticker: GME) short squeeze had 
salient factors, that colored the brief tide of 
mesmerized audiences around the world, both 
the Gamestop short squeeze.  
in lay-circles as well as in the specialized 
financial markets. At the root of the issue 
was an attempt by regular, small-scale 
investors (mostly members of subreddit 
r/Wallstreetbets) pooling their financial 
energies to sabotage the short positions 
held by powerful hedge funds in 
downtrodden stocks. While such a 
counter-coup would normally not create 
such ripples in the market in and of itself, it 
was the portrayal of such a move, as 
evident in the subreddit chats, that there 
was a David-versus-Goliath struggle of a 
counter-hegemonic natures underway. This 
galvanized many small-size investors to join   

ranks and thwart (or attain the sense of  The American public seethed with the wounds 

thwarting) large Wall Street giants, at least for  of several types, including the misery of death 

a moment.    and impoverishment during the Covid-19 

  pandemic. It also continued to reel, below the 

The specific mechanism of subterfuge used is  surface, from the tremors of the 2008 Global 

known commonly as the ​short squeeze​, in  stock, looking to purchase back the stock at a lower price 
which large inflows of funds into a stock price  in the future and netting a profit in the difference 
between the original price and the compressed later 
make any short position on the stock  price. However, a short squeeze could lead to a possibly 
untenable.​1​ The GameStop short squeeze  infinite loss for the short seller if the price rises 
indefinitely. This is why short selling is considered a 
1
​Shorting a stock involves the anticipation of a future fall  comparatively risky strategy, with theoretically immense 
in its price. Investors enter short positions on borrowed  downside risks if the stock in question actually rises.. 

Electronic copy available at: https://ssrn.com/abstract=3775127

Financial Crisis (GFC). These wounds had been  continued digitalization of gaming and the 
glossed over with the shallow bandage of  lockdown restrictions. GME’s shares were in 
federal stimulus that was largely pocketed by  fact sold short by over 140% as of 22 January, 
“banksters,” i.e. the American financial elite.  2021. This left an opportune moment for 
Both in 2008 and 2020, a disproportionate  r/WallStreetBets to launch a short squeeze on 
amount of the salvaging stimulus went into  GameStop.  
the coffers of the 1% rather than into relief for   
the American masses. Not a single American  At the time, two major hedge funds, Citron 
banker was directly jailed for misconduct  Research and Melvin Capital, were 
during the GFC, and yet a generation of  aggressively short-positioned to crush 
redditors was coming of age with vivid  Gamestop’s stock. Citron had in fact issued a 
memories of the traumas that their families  comment a short time prior to the short 
faced during that time of crisis and thereafter  squeeze, saying that Gamestop’s price would 
as well.  fall. Yet given the galvanization of small-time 
  investors in favor of the short squeeze, GME’s 
During the 2020 coronavirus pandemic, many  price shot up by more than 700% by January 
people were forced into lockdown conditions,  27, and its excessive volatility caused trading 
which allowed them to explore avenues for  to be halted multiple times during that 
redeploying their scant capital. Record-low  duration. The volatility in options volume also 
interest rates and constrained ability to spend  instigated a gamma squeeze, as market 
on discretionary items during the lockdown  makers were being forced to purchase shares 
also fueled surplus capital among small-scale  to hedge the increasing short exposure.  
investors. Coupling this confinement and   
surplus capital with a seething rage against  There was also elite sympathy for the 
the “machine” of late-stage American  subredditors, as when tech baron Elon Musk 
capitalism led to the genesis of the Gamestop  tweeted a link to r/WallStreetBets after GME 
Short Squeeze movement.  closed trading +92.7% on January 26. Excluding 
  extended-hours trading, GME’s price was at 
In the run-up to the short squeeze,  $483.00 (which as 190x higher than the 
Gamestop’s shares were already sold short in  stock’s historic low of $2.57), which translated 
excess, thus putting a downward pressure on  into a market capitalization of US$33.7 billion, 
the stock that suggested an almost certain  thus making GME a larger listing than many 
conviction in its forecast decline, due to  companies on the S&P 500 index.  
problems of adaptation within the firm to the 

Electronic copy available at: https://ssrn.com/abstract=3775127

GME was not the only company that came in  subredditors ensued and the share price fell to 
the subreddit’s crosshairs. AMC was the next  $300, but this was assuaged by extensive 
target of a short squeeze,​2​ in part because of  community support on social media sites. 
its similar short position share pressure. Its  There were other ebbs and flows in the price 
value also rose astronomically (+480%  thereafter, which the major broker 
seven-day rise). Other names included  (Robinhood) sought to control. According to 
Blackberry, Koss Corporation, Nokia, and  social media websites, many traders were 
Eastman Kodak.   mulling the filing of complaints with the 
  Securities & Exchange Commission.  
The counter-hegemonic push by the   
subredditors caused disruptions to trading  For its part, the hedge fund Melvin Capital, lost 
across the financial system, and multiple  30% of its value year-to-date (YTD) after the 
brokerages reported restrictions and  short squeeze. Melvin procured $2.75 billion in 
disruptions (such as TD Ameritrade). It is worth  emergency funding before closing the position 
noting that trading volumes on January 27 (in  on January 26. Meanwhile, Citron closed its 
terms of share count) were in fact higher than  position with a 100% loss. 
the peak of October 2008 during the GFC, and   
was the third-highest in dollar terms over the  Several centrist and leftist American leaders 
past twenty years (since counting from the  condemned the subsequent complaints from 
internet dotcom bubble of 2001).  hedge funders as largely hypocritical. They 
  accused hedge funds, who have garnered a 
On January 28, 2021, GameStop shares  notorious reputation for market manipulation 
opened even higher in pre-market trading,  and cold-blooded financial gimmickry, and yet 
reaching a high of $500. However, at  they had the gall to complain about 
approximately 8:00 AM EST, Robinhood  counter-hegemonic actions from public 
delisted GameStop, AMC, BlackBerry, and  activism. Senator Elizabeth Warren noted that 
Nokia from its trading platform, thus creating  hedge funds “have treated the stock market 
a counter-counter-hegemonic restriction;  like their own personal casino while everyone 
whereby users could no longer open new  else pays the price". Representative Alexandria 
positions in the stock, even as they could still  Ocasio-Cortez (AOC), Representative Rashida 
close existing positions. A minor panic among  Tlaib, echoed this sentiment.  
 
2
AMC Networks (Ticker: AMCX) is a similar  Reddit co-founder Alexis Ohanian compared 
sounding company that also saw significant price 
the Gamestop short squeeze to Occupy Wall 
rises 

Electronic copy available at: https://ssrn.com/abstract=3775127

Street, saying that “it’s a chance for Joe and 
Jane America — the retail buyers of stock — 
 
to flex back and push back on these hedge 
funds." This statement encapsulates much of 
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Electronic copy available at: https://ssrn.com/abstract=3775127

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Electronic copy available at: https://ssrn.com/abstract=3775127