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Last week’s frenzied battle over GameStop that pitted retail traders against Wall Street hedge funds joins a long line of tussles between investors going ‘long’ by buying shares and those seeking to turn a profit from ‘short’ trades.

Short trading involves borrowing shares and selling them on with the aim of buying them back later more cheaply and pocketing the difference. But it can be a risky bet.

Markets can go the wrong way and losses can be crushing if a stock climbs, forcing short-sellers to scramble to buy back shares so they can close their positions.

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GamesStop, a U.S. videogame chain that was a target for short sellers, was a prime example of a so-called ‘short squeeze’. Retail investors piled into the stock last week and at one point had driven its share price almost 2,500% higher than at the end of 2020, leaving some hedge funds nursing big losses.

Other stocks that shorts targeted had also surged in the trading frenzy, fuelled by chat on a Reddit online forum.

Goldman Sachs called it the biggest squeeze in 25 years. IHS Markit said U.S. firms that were most heavily shorted outperformed those least shorted by about 24% in January.

GameStop shares are now 75% below their peak.

Here are several notable incidents of a ‘short squeeze’:


German carmaker Volkswagen was embroiled in “the mother of all short squeezes” in October 2008 when its share price quintupled in two days, briefly making it the world’s most valuable company.

Rival Porsche’s quiet purchases of VW shares since 2005 had boosted VW’s valuation, luring in short-sellers. By the time Porsche dropped its bombshell and announced control of 74% of VW, around 12% of shares were on loan.

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Hedge fund losses totalled some $30 billion.

Tragedy followed. Billionaire Adolph Merkle killed himself after his family made a wrong-way bet in shorting VW.


A $1 billion bearish bet on nutrition supplements firm Herbalife by Bill Ackman’s Pershing Square Capital resulted in a five-year duel with rival Carl Icahn.

Ackman called Herbalife a pyramid scheme and was short 20 million shares in 2012, accounting for over half the shorted volume. But a 40% share plunge was reversed when Third Point, another hedge fund, bought into Herbalife, boosting the price by 76%. Icahn followed, becoming the company’s biggest shareholder.

Ackman exited his short at a loss in 2018 after watching Herbalife’s shares rise more than 150%. The Wall Street Journal estimates Icahn’s collective gains from Herbalife at $1 billion.


In November 2015, entrepreneur Martin Shkreli orchestrated a short squeeze on debt-laden biotech firm KaloBios, sending its shares 10,000% higher. After the price jump, KaloBios said a group led by Shkreli had acquired 50% of its shares.

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In the stampede of short-sellers seeking to cover their positions, the stock climbed to $45 from just 45 cents before the squeeze. But just two months later, it had tumbled below $2 when KaloBios was delisted from the Nasdaq.

The squeeze plunged many small traders into hardship. One started a GoFundMe campaign to cover trading losses.


A U.S. grocer named Clarence Saunders, owner of the Piggly Wiggly store chain, was undone by a short squeeze he created in 1922 to punish those betting against his company.

Using borrowed money, Saunders accumulated large amounts of Piggly Wiggly stock, more than tripling its price. But the New York stock exchange suspended trading in the stock and granted traders more time to cover their positions.

As the bears sourced shares from elsewhere, prices tanked, forcing Saunders to sell. He eventually declared bankruptcy.


Buoyed by their GameStop gambit, Reddit’s retail traders took on silver. But they found less success buying a global commodity than when targeting individual stocks.

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They might have learned a lesson from another ‘long’ move in the silver market in 1980.

That year, tycoons Nelson and Herbert Bunker Hunt held two-thirds of silver futures contracts on New York’s Commodity Exchange, or more than $6 billion of exposure. In January 1980, they were sitting on a huge gain when silver shot above $50 an ounce from $6 a few months earlier.

But their long bet backfired. Rising supply sent prices plummeting and banks issued margin calls on the futures contracts held by Hunts. Unwilling to accept more silver as collateral, lenders offloaded the metal. By March 27, “Silver Thursday”, futures dropped to $10.80 from more than $30.

The Hunts declared bankruptcy in 1988.

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