How did Redditors push up the stocks of a ‘failing’ company? And what comes next?

How does a small retail company that sells video games, worth less than $400 million in the middle of 2020, become a $10 billion company in less than six months? How does its share price climb from about $20 on January 12 to $347 on January 27 – then fall back to $193 the very next day?

The stunning price surge in GameStop shares, driven largely by hyped-up Reddit users with the aid of Elon Musk, has drawn the attention of the United States government, led to calls for regulation from the head of the NASDAQ exchange and even driven up the shares of an Australian mining company with a coincidentally similar sharemarket code.

How is this happening? The simple answer is it is a power play, magnified by social media, between small retail investors who want some share prices to rise and larger hedge funds who have made big bets that those same prices will fall.

Revenge of the little fish

Melvin…