In general I understand the mechanism of the Gamestop event (short squeeze), but I am a bit confused as to why it happened only when Reddit investors got involved.
I would presume that anybody with enough money (and there are plenty of rich people on Wall Street) could have done the same. Or there was something unique about this that makes it impossible for "regular" players to do what Reddit investors did?
Short squeezes and gamma squeezes (the option counterpart) are not unprecedented. They are however quite risky.
An example of this happening before is the Volkswagen Short Squeeze.
JP Morgan squeezed the aluminium market back around 2015.
Here's Goldman squeezing aluminium back in 2011.
To some extent, the big players are defined by always looking for opportunities to do this. What they don't do, because it's effectively illegal, is go round publicising their holdings and trying to rope in others to the squeeze.
When the music stops, whichever Redditors are left holding GameStop shares at that point will lose their shirts, because the shares are really only worth a few dollars. No serious fund is going to take that risk.
Of course they could have. In fact, they are probably already participating, and the price movement is more due to the funds than to individual investors on Reddit. Just check out GME's statistics.
As of time of writing:
95% institutional ownership. Unless the fund managers themselves are on Reddit, the Redditors account for no more than 5% of GME's outstanding shares, and GME's price movements are still largely due to the funds.
