By Wilson Walker

MENLO PARK (KPIX) — Thursday was another rollercoaster day for GameStop with the company’s stock dropping a whopping 44 percent as small online investors ran into a roadblock in their trading war with Wall Street short-sellers.

For anyone following or simply trying to untangle this bizarre tale, it’s important to know that GameStop isn’t really driving the story. The video game retailer is more of an accidental passenger in a larger story; it is the individual stock buyers who have launched a war against hedge funds, rattling Wall Street.

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A small group of protesters gathered outside the offices of Robinhood Markets in Menlo Park Thursday. Robinhood is a commission-free trading app that lets people buy and sell stocks without a broker. It’s also how an army of Reddit users upended the hedge funds that wanted to short-sell GameStop.

All last year GameStop stock was struggling, selling below $20 a share. Big Wall Street traders saw an opportunity and they started shorting the stock — meaning they borrowed shares then immediately sold those shares expecting the price would fall and they could repurchase them at a lower price, return them to the lenders and pocket the difference.

But, if the stock were to rise in price, they’d have to buy at a loss in order to return the borrowed shares.

A group of investors and day-traders on a Reddit forum didn’t like the hedge funds betting against GameStop, so they encouraged everyone to buy which drove the price up, causing massive losses for the Wall Street short-sellers.

“The people put their money in,” said protester Jenna Fishbine. “Wall Street lost a bet and they need to pay.”

Those Redditors started buying, sending the stock price soaring. This month, GameStop stock has rocketed from below $20 to more than $400 at one point, thanks to the grassroots effort to upend the system.

That cost a couple Wall Street hedge funds about $5 billion. At that point, Robinhood put restrictions on trading GameStop specifically.

“They’re shutting it down,” Fishbine said. “They’re changing the rules, they lost their bet, they need to pay, and the people are pissed. Because this is people’s money.”

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All of this, from the short squeeze to the trading restrictions, has grabbed the attention of lawmakers in Washington, the New York Attorney General, and anybody who pays attention to the stock market.

“I covered it with my PhD students this morning,” said Stanford University Graduate School of Business professor Darrell Duffie. “It’s amazing.”

Duffie says the GameStop story reveals several things about the current market.

“It teaches us that things have changed,” explained Duffie. “We are in a world in which a fringe set of investors, possibly a large number of them, really like to cause havoc for hedge funds. Especially those that are shorting firms.”

Another lesson is that markets and regulators often don’t have answers for unusual events. At least not quick answers.

“I think this will calm down after a point,” Duffie said. “Maybe a change in regulation will be called for, or some investigation. But things will improve, the market design will improve, the regulations will come in if necessary and investors will calm down.”

But the anti-Wall Street sentiment that drove this is not going away.

“The people that were putting stuff on Reddit, they outsmarted Robinhood and the stock market,” said Derek Turner. “I think that’s the bigger picture. Robinhood and Wall Street are very upset, because they got fooled.”

Robinhood said it will allow limited buying of restricted stocks like GameStop when trading opens Friday.

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KPIX 5’s Katie Nielsen contributed to this report