The more people take part and have strong hands, the more the losses will be democratized, on the way to the real desired outcome against naked shorting hedge funds. I don't mind losing a couple hundred bucks investment for this.
It’s a credentialist argument. Whatever we say the stock is worth is fundamentally correct, and if you disagree, well, you’re just an unsophisticated investor who shouldn’t be allowed to participate in the market.
On the other hand, WSB is basically saying, "So what? We don't care about the argument, we don't care about the true value here, we're just exploiting a market dynamic (probably illegally), and collectively interfering with the ability of hte market to price this efficiently, and we just want the number on the price to move so we can cash out."
The history of financial markets is littered with the bodies of unsophisticated investors participating for non-fundamental reasons. Tulips, .com, real estate bubble. Every mania in history follows this pattern of being driven more by the emotion and inertia of the game vs. the underlying fundamentals, this looks no different to me.
Hedge funds took short positions because in their model, given GameStop's business and whatever other factors, the stock was due to drop. That's valid, but it's no more valid than the WSB model that the price would skyrocket because overexposed hedge funds would be forced to close their short positions. What is the fundamental argument that GME was overpriced at $20?
Also, "unsophisticated investors" are not the only ones participating for non-fundamental reasons. When Citadel pays for order flow from Robinhood and then gets out in front of those trades, they're not trading based on fundamentals, they're trading based on momentum. Is that not also interfering with the ability of the market to price GME efficiently?
The irony is, once this stock finally comes crashing down, it will be the small retail investors losing a lot of money, and a different set of Wall Street investors will be the ones reaping the reward.
How do market makers get outsized benefits from this? I'm uninformed.
TL;DR Citadel sees Robinhood order flow and can get in front of it, and also bought a chunk of Melvin on the cheap when they got squeezed out of their short position.