I couldnt inderstand the explanation here(tho i already knew about shorting stock from long ago), but looking for a dumbed down explanation i found this part more interesting:
"...
the size of the loss Melvin Capital actually took, but noted that the company took on a $2.75 billion cash infusion from two investment banks to keep itself solvent. Gabe Plotkin, Melvin’s manager, told CNBC that speculation the hedge fund would file for bankruptcy is false.
How much money have people made?
Bear in mind that this is paper wealth (and it’s fluctuating wildly), but the trading on GameStop — by the way, on Tuesday it was the most-traded security in the world — has created about $2 billion in wealth, most of it for Cohen and the company’s two other biggest shareholders". So a failing/freefalling company made its investors ard $2B (id hardly call the short sellers "investors" more vultures-i think i learned some of this from Suits or fictional media, so if im wrong blame tv or movies. N nearly bankrupted a hedge fund(tho they denied it, still credible reports/guesses are they borrowed ard $2B to pay their "gamble" off. Otherwise the whole short-selling/Wall St house of cards will collapse. That hedge fund might stave off bankruptcy if they're lucky.
Funnily i got info from:
GameStop’s stock market explosion, explained
a game/pop culture site, maybe cos of gamestop-i thinknthis might not hv blown up so much if it had been a boring safe company like the other companys mentioned in the article. Or if similar such had happened to Toys R Us, tho it wasnt a short so muchbas a pillage.
The takeaway tho is:
"...for the layperson, the best advice probably came from the well-known games industry analyst Michael Pachter last week: Stay away."