How Institutional Investors and Individuals Were Tripped Up by the GameStop Saga

Several professional money managers were caught unawares in early 2021 by the sudden run-up in the price of GameStop stock. When the dust settled, the hedge funds that they managed lost an aggregate of billions of dollars when they were forced to purchase the price-inflated shares to cover short large positions that they held in GameStop.

Hedge funds generally do not draw any sympathy in the investment community, and many individual investors expressed a degree of satisfaction over the comeuppance that those funds experienced. Nonetheless, all investors would do well to analyze the circumstances that catalyzed the GameStop saga and the subsequent calls from different sectors of the investment industry for new regulations to prevent similar events. The reality is that while hedge funds lost money, thousands of small investors also lost substantial value in their portfolios as they attempted to ride the GameStop wave long after the market had already absorbed its effects.

What Happened to GameStop’s stock price?

GameStop owns and operates hundreds of brick-and-mortar stores that sell video games. Its stock was trading at $3.25 per share in September 2020 when a professional investor bought a 13% interest in the company and began urging the company to transition its business to an online model.

GameStop and other companies like it have long been targets of institutional investors that hold large short-sale positions in their stock. Short-sellers borrow shares that they then sell in the open market with the expectation that the company’s share price will decline, thus allowing them to repurchase the borrowed shares at a lower price. Short selling is a legitimate investment strategy that contributes to the efficiency of the markets by improving liquidity and overall trading volume.

Hedge funds and other institutional investors perceived a significant short sale opportunity as GameStop announced plans to close more than 450 of its stores. Within a short period, total short interest positions in GameStop stock rose to more than 70 million shares. Simultaneously, the company caught the attention of individual investors on a popular social media platform. Those investors went on a GameStop buying frenzy with an online app that enabled them to make commission-free purchases of GameStop shares. By the end of January 2021, GameStop’s share price had risen to more than $140 per share. GameStop’s share price experienced high volatility in the first half of the year, often increasing or decreasing by 50% to 90% in a single trading day. The stock continues to trade at or near $150 per share at the midway point of 2021.

The institutional investors that bet against GameStop were caught in a short squeeze, in which they were forced to purchase shares at what might have been an artificially inflated price in order to deliver borrowed shares back to their original owner. Many individual investors lost money when they purchased GameStop shares at high prices but then sold in a panicked frenzy when the share price dropped precipitously over the course of one or two trading days.

What has been the response to the GameStop saga?

Responses and critiques to the GameStop saga came in three broad waves. The first wave came from the hedge funds and online trading apps that were on the front lines of the GameStop share price volatility. Hedge fund criticism forced a trading app to temporarily halt trading in GameStop stock. Shares of the stock continued to be traded, but not through the app that was the primary vehicle used by individual investors. That trading halt served to convey an impression that the markets were skewed against individual investors, and it was subsequently lifted to allow users of the app to continue trading.

The second wave came from academics and retail brokers, all of whom offered different opinions and recommendations on what catalyzed the saga and how similar events could be prevented in the future. The inevitable third wave began with hearings, testimony, and analysis from representatives of the United States Securities and Exchange Commission, the Financial Industry Regulatory Authority (FINRA), and the Depository Trust and Clearing Corporation. The hearings initially targeted hedge funds that were perceived as participating in predatory short selling. The focus then shifted to the intersection of finance and technology, and particularly the new digital trading applications that give individual investors low- or no-cost access to the markets.

The regulatory bodies focused their observations on the desirability of improving disclosures of short interest and the related activities that support short sales. In response to criticism that short sale strategies are divorced from a company’s fundamental value, the SEC responded that short sales activities have been part of the markets since their inception. The SEC has the authority to adopt rules and regulations to ensure that the markets are fair, orderly, and efficient, and free from fraud and manipulation. New regulations to improve the transparency of short sales activities will contribute to this mission, and it is likely that the SEC and other regulatory bodies will develop and adopt new disclosure regulations over the next 12 to 24 months.

How can individual investors benefit from the GameStop Saga?

Many individual investors who lost value in the GameStop saga were likely reacting to market events from an emotional perspective and were not following a fully-formed wealth creation and management strategy for investments in their portfolios. The meteoric rise in GameStop’s share price certainly presented an ad hoc opportunity for intelligent investors that devoted a portion of their portfolios to tactical investment opportunities. The investors that made mistakes were those who shifted a major portion of their investment dollars into GameStop stock, essentially wagering that the stock price would continue to climb and that they could get out of their positions in time to profit from that rise.

The information disclosure principles that are the foundation for all modern stock exchanges continue to make them the most transparent and efficient place for an investor to increase the value of his or her portfolio. Outlying events like the GameStop saga will continue to occur as long as the evolution of finance lags the growth of technology. Investors can accommodate these events with wealth management plans that include strategic and tactical components that maintain core value with a potential to invest a limited portion of their portfolio into one-time opportunities as they arise.


Please read and review the following disclaimer and all other information before you proceed to any other part of this website. When you have completed your review, and you are confident that you understand the entire substance of this disclaimer and information, please click on the box labeled “I Accept” to signify your agreement to the terms and conditions that govern your use of this website and the information included on it. If you do not agree to these terms or conditions or you are not willing to click the designated box, you must exit without proceeding further.


TERMS AND CONDITIONS OF YOUR ACCESS TO AND USE OF THIS WEBSITE: Astor Asset Management, LLC (the “Firm”) is a wholly owned St Kitts & Nevis limited liability company and maintains registrations through its stand-alone affiliates in Anguilla, Bahamas and Canada, (the “Company”) catering to Ultra High Net Worth (“UHNW”) clientele. The Firm and the Company have published information on this website ( that may be accessed and used only by persons and entities that qualify as prospective or actual clients of the Firm and its sophisticated financial products and services.


Certain portions of this website refer or include links to products and services offered by third parties that may or may hold licenses from various jurisdictions. The Firm does not hold or maintain its own global financial licenses, and refers to third party services for informational and educational purposes only and not by way of endorsement or recommendation. But the Firm through its stand-alone affiliate Astor Capital Fund Ltd does maintain a Money Service Business license in Canada, (“MSB”) having an MSB Registration Number M21136919 under license from Financial Transactions and Reports Analysis Center of Canada (“FINTRAC”). The main office for MSB is 1730 St. Laurent Blvd, Ottawa, Ontario, Canada K1G5L1 and engages in authorized activities to its international (non-Canadian) clientele.


You have the sole and absolute responsibility and liability for your decisions that may be based on information you receive or derive from those third-party websites. Any person who accesses this website is solely responsible and liable for compliance with the applicable laws, rules, and regulations of the jurisdiction in which such person resides, or in which such person is currently located. The Firm shall have no liability for any person’s access to this website that originates from a jurisdiction in which such access may be prohibited.


Astor Asset Management operates strictly in accordance with the United States Securities Act of 1933 and the United States Securities and Exchange Act of 1934 (both, as amended), including all of the rules and regulations promulgated under both Acts. For full SEC registration and reporting details, including, without limitation, the Company’s S-1, Prospectus, Current Reports, 8-K, 10-K, and Annual Reports, please refer to the EDGAR Company Search Results for Astor Asset Management, LLC at Astor Asset Management, LLC files reports under Central Index Key (CIK) #0001488446. All of the Company’s reports reflect a fiscal year that ends on December 31.


The financial products and services that the Firm offers are not available in the United States of America and Canada or to citizens of the United States of America or Canada regardless of their residence. The Firm takes no position with respect to other jurisdictions, and any person who accesses this website is solely responsible for making such determination. No person, regardless of where such person is located, may rely or act upon any information contained in this website.


The Firm’s products and services are not suitable for all investors and the Firm offers no advice as to whether any specific product or service that it offers may be suitable for any person or entity, and such person or entity is solely responsible for seeking professional and independent financial, legal, and tax advice before considering an investment with or any participation in any of the Firm’s products or services.


By entering into a referral agreement or contract with the Firm you expressly give the Firm the right to contact you via electronic mail and courier with newsletters, promotions, events and marketing materials.


The Firm has not and does not solicit any person to utilize this website or to access any information in it. Every person that accesses this website is gaining such access through his or her own personal choice and option, and without encouragement from the Firm or any affiliate of the Firm.


Nothing in this website is, and in no part shall be, construed as a financial promotion or a solicitation to procure any of the Firm’s products or services. The Firm has taken great care not to promote any financial products or services on this website, and it is relying on the exemptions and exclusions that are available in different jurisdictions with respect to such disclaimers. The Firm has a strict policy of not soliciting the participation in, or offering financial products services to any jurisdiction in which those products or services are not allowed or authorized. You must contact the Firm immediately if you are the recipient of any solicitation or offer to procure products or services from the Firm.


The Firm makes no warranties, guarantees, or representations with respect to the accuracy or completeness of any information included in this website, or as to whether such information is error-free.


Your decision with respect to any of the Firm’s services or products is your sole and exclusive responsibility to make. The Firm will rebuff any requests for advice that you might make with respect to the products and services described in this website. You are acting on your own volition and initiative in taking any and every action in response to information that you derive from this website. Further, you bear sole responsibility and liability for compliance with all legal and regulatory requirements that may be applicable in the residential or domiciliary jurisdiction.The Firm is not offering or soliciting the sale of any securities or any other financial products or services through this website. The Firm takes no position as to local laws, regulations, rules or restrictions that may be applicable to your use of this website or the information in it. The Firm specifically warns all persons who access this website that the information in it is not to be utilized or distributed in the United States of America or Canada.


You are not authorized to copy, reproduce, or distribute any information in this website and you may not link into this website from any other website. The Firm not a registered investment advisor and is not a securities broker/dealer. The Firm conducts business only in those jurisdictions in which it has an applicable exemption or exclusion from registration requirements.


The Firm and its affiliates disclaim all responsibility for any access to this website that is contrary to applicable laws and restrictions. The Firm expressly disclaims all liability and responsibility for actions by its third-party contractor agents who act outside of the scope of their authority.


By your accessing of this website, the Firm assumes that you have read and reviewed these terms and conditions carefully and thoroughly, and that if you click the box labeled “I accept”, you are doing so with full and complete knowledge of these terms and conditions and as a confirmation that your local laws, rules, regulations, and restrictions allow you to access this website. Further, you are accessing this website without having been solicited by the Firm to gain such access, and you have verified that accessing this website does not violate the laws of your jurisdiction or domicile.


Your access of this website is also your representation and warranty, which the Firm may rely upon, that you are not located in or a citizen of the United States of America or Canada. The Firm has enacted measures to block access to this website from IP addresses that are located in the United States of America and Canada, and your use of a virtual private network, a TOR browser, or such other means that are intended to disguise your location is a violation of your right and opportunity to access this website. The Firm reserves full right and authority to prosecute such violations of these terms and conditions. Further, you are representing that you are acting on your own behalf and not on behalf of any third parties, including any third parties located in the United States of America or Canada.


Your access of this website is also your representation and warranty, which the Firm may rely upon, that you understand that the Firm is not, nor does not hold itself out to be, a securities broker-dealer, investment advisor, or underwriter licensed or registered with any securities regulatory authority. Astor does not engage in or promote products, activities, or services in jurisdictions where licensure and registration is required. Astor outsources to third-parties any clients, services, or activities as deemed necessary to comply with state, federal, and regulatory authority law. All information on this website is presented “as is”, and the Firm takes nor position on its correctness or completeness.


Astor Asset Management and its Astor subsidiaries are corporations organized and existing pursuant to the laws of the Anguilla, Bahamas, Canada and Federation of St Kitts & Nevis. The Firm conducts business out of these jurisdictions, and only with accredited UHNW investors that need sophisticated financial products. Our typical client is a founder and chairman of a publicly traded company, prominent celebrities and politicians.