SEC reinvestigate on the war between retail investor and Wall Street

How did the epic "retail investor stocks" get so high?

Although GameStop is well-known for "retail investors stocks", the SEC report pointed out that in addition to retail investors, many institutional investors also participated in the transaction of Game Station, including some well-known hedge funds.

It is worth mentioning that the report noted that GameStop had an astonishing short selling ratio (the ratio of the number of shares shorted to the outstanding shares) at the time. Even on December 31, 2020, the short selling ratio of Game Station exceeded 100%, reaching 109.26%. The SEC reported that if someone bought stock from a short seller and then lent the stock, it would appear that the stock was sold short twice, resulting in a short-selling ratio of more than 100%. In January 2021, GameStop was the only stock that sold more shorts than its outstanding shares.

     In many analyses, the "short squeeze" effect has become the focus of attention. The report shows that part of the long power comes from the "short squeeze" effect. In the face of the rapid rise in stock prices, the bears will close short positions, which will also push the stock price to rise, which will lead to new liquidation needs.

Another important aspect that the SEC report pointed out is that some broker-dealers restrict some of the trading behavior of investors, which has a huge impact on the market. When GameStop and some meme stocks skyrocketed or plummeted, some broker-dealers with a large customer base of individual investors restricted trading behaviors on these stocks, further exacerbating stock price volatility.