In early 2021, the world watched a failing mall-based video game retailer do something impossible. It didn't just go up; it exploded. Most people remember the headlines about Reddit "degenerates" taking down a billionaire hedge fund, but honestly, the story of what happened with GameStop stock is a lot weirder and more complex than a simple David versus Goliath narrative.
Basically, GameStop (GME) became the first "meme stock." It was a moment where social media, pandemic boredom, and sophisticated financial mechanics collided to create a $30 billion market anomaly. By the time the dust settled, the company was saved from bankruptcy, a major hedge fund was dead, and the way we think about the stock market changed forever.
The Setup: Why Shorts Targeted GameStop
To understand the chaos, you have to understand why Wall Street hated GameStop. By late 2020, the company looked like the next Blockbuster. People were buying games digitally. Why drive to a strip mall to buy a physical disc when you can just download it on your PS5?
Short sellers—investors who bet that a stock price will fall—piled in. They didn't just bet against it; they overdid it. At one point, the short interest in GME was over 140%. That's a weird, technical glitch where more shares were sold short than actually existed in the "float" (the shares available for trading).
Hedge funds like Melvin Capital were convinced GameStop was heading to zero.
Then came Ryan Cohen. He’s the guy who founded Chewy and sold it for billions. He bought a massive stake in GameStop and joined the board in January 2021, bringing a vision of turning the brick-and-mortar dinosaur into an e-commerce giant. This gave retail investors a "fundamental" reason to believe, but the real fireworks were sparked by a guy named Keith Gill, known online as Roaring Kitty.
The Squeeze of the Century
A "short squeeze" happens when a stock's price starts rising and short sellers are forced to buy back shares to close their positions, which pushes the price even higher. It's a feedback loop.
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On January 11, 2021, GameStop was trading at around $17. By January 27, it hit an intraday high of $483.
It was absolute insanity.
Retail traders on the subreddit r/wallstreetbets were egging each other on with "diamond hands"—a term for refusing to sell no matter how high or low the price goes. They saw an opportunity to "squeeze" the hedge funds that had over-leveraged their bets.
Melvin Capital lost 53% of its value in a single month. They eventually had to get a $2.75 billion bailout from Citadel and Point72 just to stay afloat, before ultimately shutting down for good in 2022.
The "Buy Button" Controversy
The most controversial part of what happened with GameStop stock occurred on January 28, 2021. Just as the stock was mooning, several major brokerages—most notably Robinhood—suddenly restricted trading. You could sell your shares, but you couldn't buy any more.
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The price plummeted immediately.
Investors were furious. They felt the game was rigged to protect the big guys. Robinhood’s CEO, Vlad Tenev, later explained to Congress that the restriction wasn't a conspiracy, but a result of a "liquidity crisis." The clearinghouses that process trades demanded billions in collateral because the volatility was so high. Robinhood didn't have the cash on hand, so they had to stop the buying to manage the risk.
Whether it was a conspiracy or just a boring back-end failure, it left a permanent scar on the relationship between retail investors and Wall Street.
Is GameStop Still a Thing in 2026?
You'd think the story ended there. It didn't.
GameStop used the massive stock surge to raise billions of dollars by selling new shares. This "war chest" allowed them to pay off all their debt and survive. Under Ryan Cohen—who eventually became CEO—the company has tried to pivot. They’ve closed hundreds of underperforming stores and focused more on collectibles and pre-owned hardware.
But it's been a bumpy road. As of January 2026, the stock has stabilized significantly compared to the 2021 peak, trading mostly between $20 and $30 (split-adjusted).
Recent Developments
- Roaring Kitty's Return: In 2024, Keith Gill resurfaced after a long silence, posting cryptic memes and revealing a massive position in GME and Chewy. The stock spiked again, though not to 2021 levels.
- The $35 Billion Pay Plan: Just recently, in early January 2026, GameStop announced a massive performance-based compensation plan for Ryan Cohen. It’s tied to astronomical stock price targets, showing that the company is still swinging for the fences.
- Institutional Shift: While Wall Street analysts mostly have a "sell" rating on the stock, a dedicated core of retail investors continues to hold. They believe GameStop is the "idiosyncratic risk" that could still break the market.
Actionable Insights for Investors
If you're looking at what happened with GameStop stock and wondering if you should jump in now, here’s the reality. The 2021 squeeze was a "black swan" event. It's unlikely to repeat in that exact way because hedge funds are now terrified of shorting stocks to 140% of the float.
1. Understand the Risks of Volatility
Meme stocks don't trade based on earnings or math. They trade based on sentiment and momentum. If you decide to play in this arena, only use money you are 100% prepared to lose.
2. Watch the Cash Position
GameStop’s biggest strength right now isn't their sales—which have actually been declining—it's their cash. They have billions in the bank. This gives them a "floor" where it’s hard for the stock to drop to zero, but it doesn't guarantee the price will go up.
3. Check the Institutional Ownership
If you want to see where a stock is headed, look at the "smart money." For GME, institutional ownership remains relatively low compared to other S&P 500 companies, meaning retail investors are still the ones driving the bus.
4. Diversify Your Portfolio
The GME saga taught people that they can win big, but many also lost their life savings buying at the top ($400+). Don't make a single stock your entire identity or your entire retirement plan.
The GameStop saga wasn't just a trade; it was a cultural shift. It proved that a decentralized group of people with internet access could, for a brief moment, exert more power than the most sophisticated financial institutions on Earth. While the fever has broken, the impact on market regulations and retail trading apps is something we’ll be feeling for decades.