GameStop’s improbable run has lifted its stock to meteoric heights – all propelled by ordinary investors, spurred by a Reddit message board, looking to show up the Wall Street funds that bet big money on the shares to fall.

The frenzied trading has catapulted the video game retailer’s valuation to nearly $20 billion, a 14-fold increase from a month ago. Prices have risen so fast, and the drama over its stock trading has consumed so much attention, that members of the Biden administration and the U.S. Securities and Exchange Commission were compelled to say they were monitoring the situation.

Regular investors have openly rebelled against the deep-pocketed hedge funds that viewed GameStop as a mall-based dinosaur, destined to go the way of the record store.

They contend that a move away from physical stores and toward e-commerce, mobile gaming and streaming could reverse the company’s spiraling financials. They also figured that if the stock price rose, all the giant funds that had brazenly bet against the company would get crushed by the weight of being wrong. This, they intuited, would trigger a cycle that would further elevate the company and enrich the everyday trader at the expense of the Wall Street establishment. Regular investors have made similar runs at AMC Entertainment, BlackBerry, Nokia and others.

Why is GameStop stock rising?

The start of GameStop’s astonishing run can be traced to August 2020, when Ryan Cohen, the co-founder of the online pet supply company Chewy, disclosed that he held a major stake in the company. Armed with a record of success in e-commerce, Cohen is leading GameStop to de-emphasize its legacy stores and to focus instead on digital sales, esports and mobile gaming.

Earlier this month, GameStop named Cohen and two other former Chewy executives to its board, tasked with helping to transform the business into a digital empire. Shares nearly doubled the week after the announcement.

What is GameStop’s ‘short squeeze’?

People claiming to have purchased GameStop shares have framed their efforts as a collective, financial rebellion, delivering payback to giant Wall Street funds that placed reckless bets and have long exploited the financial system at the expense of the little person.

Part of GameStop’s improbable rise is tied to the belief that its shares were predicted to fall. At the start of the year, GameStop was among the most highly targeted companies by short sellers – investors who bet against a company and stand to make money when its stock price falls. To short a company, a seller typically borrows a stock and then sells it, with the intention of buying the stock back later once the price drops. The seller then returns the shares to the entity from which it borrowed and pockets the difference in price.

But when pessimistic bets fail, and stock prices rise, short sellers still have to cover their borrowed shares. They are then forced to buy the stock back at the higher price. This is known as a “short squeeze.” In this situation, short sellers try to cut their losses and buy shares that they expected to lose value. This money-losing squeeze can fuel a cycle of even higher prices, as short sellers purchase more shares and drive stocks even higher.

How are trading companies responding to the frenzy?

Interactive Brokers placed restrictions on GameStop trading, saying that long stock positions would require a 100 percent margin and short stock positions would require a 300 percent margin, indefinitely.

“We do not believe this situation will subside until the exchanges and regulators halt or put certain symbols into liquidation only,” the firm said in a statement. “We will continue to monitor market conditions and may add or remove symbols as may be warranted.”

Robinhood also took action to rein in GameStop, as well as other targeted companies like AMC, BlackBerry, Express, Koss, Nokia and Naked Brand Group. It raised margin requirements for certain securities, “in light of recent volatility,” according to a release.

Alexis Ohanian, the Reddit co-founder, said in a series of tweets Thursday that the frustration among ordinary investors like those who claim to have fueled the frenzied trading of GameStop and AMC through the message board r/WallStreetBets dates back to the 2008 financial crisis.

Meanwhile, at least seven retail brokerage firms – including TD Ameritrade, Robinhood Crypto, E-Trade, Charles Schwab, Fidelity Investments, Vanguard and Interactive Brokers – experienced service disruptions Thursday morning, which many attributed to higher volume though did not specially cite the GameStop activity.

The website Downdetector reported log-in and website issues for some of the firms, as well as Reddit, starting after 9 a.m. Eastern.