Elon Musk lashes out over Reddit war, fuels GameStop share surge

Elon Musk this week tweeted out against the GameStop saga after home traders on Reddit all but declared war against Wall Street traders and hedge funds. However, his tweets might have had the opposite effect as he may have hoped for.

On 26 January 2021, his one-word tweet – “Gamestonk!” – received more than 45 000 retweets and nearly 240 000 likes with thousands of people joining into the conversation (12 200, give or take, at the time of publishing).

GameStop shares surge

That one tweet cheered on the Redditors of the WallStreetBets subreddit and of course, GameStop prices surged. Not surprisingly, either; CNN reported earlier this week that Etsy share prices surged after Musk said he “kinda” likes it.

Then on Thursday evening, Musk said “shorting is a scam” which is only legal for “vestigial reasons”.

“U can’t sell houses u don’t own, u can’t sell cars u don’t own but u can sell stock u don’t own!? This is bs – shorting is a scam legal only for vestigial reasons”. [sic]

Elon Musk

We explained the “long and short” of short selling here (yes, I’ll be sticking with this pun for the foreseeable future).

The TL:DR is this: Buyers can borrow stocks without buying it, in the hope that the stock price will take a dive. They then buy it back when it plummets, and sell the stock back to profit off of the difference.

Tesla versus short-sellers

It should also be noted that Musk has a personal stake in the matter. Back in 2020, major hedge funds claimed Tesla was massively overvalued. Short sellers were waiting for Tesla stock to plummet to profit off it.

You might recall Musk releasing a part of “short shorts on the site? Yeah, that was to mock the short-sellers betting against Tesla. He won that round; as reported by CNN, short-sellers lost more than $40 billion while Musk’s wealth tripled. Before that, he tweeted:

“Tesla will make fabulous short shorts in radiant red satin with gold trim. […] Will send some to the Shortseller Enrichment Commission to comfort them through these difficult times”.

Musk backs AOC

Musk also sided with Alexandria Ocasio-Cortez’s call to investigate the Robinhood app for barring GameStop purchases. She called out day trading app’s decision to halt the trading of GameStop stock. Ocasio-Cortez said:

“This is unacceptable. We now need to know more about Robin Hood app’s decision to block retail investors from purchasing stock while hedge funds are freely able to trade the stock as they see fit. As a member of the Financial Services Cmte, I’d support a hearing if necessary”.

Musk replied to her tweet with, “Absolutely”. As of Thursday, GameStop shares were up more than 680%.