In this video I review GameStop (GME, $4.01, $260M market cap). As of August 2020 I’m bullish on the stock – perhaps foolishly so. What are your thoughts on GME? Do you agree or disagree with my take? What did I overlook in my analysis? Which of my assumptions were off?
In finance, being short in an asset means investing in such a way that the investor will profit if the value of the asset falls. This is the opposite of a more conventional “long” position, where the investor will profit if the value of the asset rises.
There are a number of ways of achieving a short position. The most fundamental method is so-called “physical” short-selling, which involves borrowing assets (often securities such as shares or bonds) and selling them. The investor will later purchase the same number of the same type of securities in order to return them to the lender. If the price has fallen between the time of the initial sale and the time the equivalent securities are repurchased, the investor will have made a profit equal to the difference. Conversely, if the price has risen then the investor will bear a loss. The short seller must usually pay a fee to borrow the securities (charged at a particular rate over time, similar to an interest payment), and reimburse the lender for cash returns the lender would have received had the securities not been lent out, such as any dividends that would have been payable to the lender if they were still the holder of shares that they had lent out.
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