What Is a Short Squeeze? Famous Examples Explained

A short squeeze is what happens when a heavily shorted stock rises sharply, forcing short sellers to buy back shares to close their losing positions, which in turn pushes the price even higher.

The two key indicators are short interest (the percentage of a stock float sold short) and days to cover (short interest divided by average daily trading volume). When both are high, the stock is squeeze-vulnerable.

The most famous modern example is GameStop in January 2021, where retail investors organising on Reddit drove the stock from $20 to $483, costing hedge funds billions and triggering Robinhood to halt buying.

The most extreme example in history is Volkswagen in October 2008, which briefly became the most valuable company in the world for two days when Porsche revealed it had quietly accumulated a 74% stake.