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What is Elon Musk's connection to GameStop? Here's how one word from the billionaire sent shares skyrocketing

Since January 12, GameStop has increased more than 18-fold to $348 from $19 and spurred concerns over bubble burst in stocks that hedge funds and other speculative players had bet would fall in value

GameStop's shares have skyrocketed more than 1,200 percent since Wall Street Bets first piled on January 11 on Reddit forum r/WallStreetBets. Thousands of members of the subreddit forum spent the last three weeks bidding up the video game retailer and the results have been staggering. And this is all thanks to Tesla's Elon Musk, who tweeted one word and members from the online community went crazy over GameStop stocks.

GameStop explained

GameStop is based out of Texas and operates over 5,000 retail stores throughout North America, Europe, Australia and New Zealand. The company's retail primarily operates under the GameStop, EB Games, ThinkGeek and Micromania-Zing brands. The GameStop stock lies at the center of a bizarre battle between Wall Street hedge funds that had taken short positions among the retail traders, who are part of r/WallStreetBets.

A couple of weeks ago, members of r/WallStreetBets discovered that hedge funds such as Melvin Capital held large short positions and decided to challenge them by soldering the stock. Their investment strategy triggered a sizeable short squeeze in the stock that resulted in the stock giving over 800 percent returns so far.

Since January 12, GameStop has increased more than eighteen-fold to $348 from $19 and spurred concerns over bubble burst in stocks that hedge funds and other speculative players had bet would fall in value.

GameStop surged 50 percent in extended trade after Tesla founder Elon Musk tweeted, "Gamestonk!!", along with a link to Reddit's r/WallStreetBets. This was Musk's second tweet in 24 hours to create a stir for an individual stock in premarket trading. Musk had previously talked about Etsy and how he "kinda" loves the online craft market.

Social media reaction

GameStop's stock prices have taken the Internet by storm. After the market closed at $344.99, a record high, social media users took to Twitter to share their excitement. One user wrote, "Around 2 weeks ago I was looking for some small stock to invest in and I came across GameStop. It was only $29 and I didn’t invest because I thought to myself 'it won’t go up anytime soon with Covid' it’s worth $147 right now. #gamestopstock."

Another wrote, "Hedge funds have been short-selling Elon Musk's stocks for some time. That's why he's most likely supporting the reddit crowd. Tesla is also one of reddit/wsb favorite stocks. There's always a motive. #popcorn #ToTheMoon #gamestopstock."

A user wrote, "I don't understand a thing written here about #GameStop, but the part where it says 'Wall Street... lost their own game to the masses' kind of sounds cool to me." Another wrote, "Bro, if you have no clue what’s going on with the stock market rn, IMAGINE WTF GAMESTOP IS THINKING."

2008 market collapse

In 2008, several banks created a housing bubble by selling mortgage-backed securities with unprecedented high profits. The bubble eventually burst in September 2008 when Dow Jones Industrial Average fell almost 800 points, as a result of which millions of Americans lost their jobs. Several Redditors say that the GameStop rally is revenge against Wall Street for the 2008 market collapse.

"GME is about more than just money. GME is about sending a message," said one Redditor in reference to GameStop's ticker "GME". The post continued: "For all the recessions they caused. For all the jobs and homes people have lost. For all the people that can't pay for college because the minimum wage has stagnated while wall street gets rich. For all the retail traders, they left holding the bag. For all the times they got bailed out with our tax money while we got nothing."