Let's just assume that there are 100 shares of GameStop (worldwide) and go from there. Let's assume that the price per share/stock before all of this was $100 (in a "good" economy, etc.). How would this all work?
A nice timeline, step by step, line by line would be nice. For ex:
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Stock is selling at $100 per share (100 shares total). June 20XX
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Economy starts tanking, stock now at $95 per share. August 20XX
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People start predicting that it will go down further, thus they start "betting" (insert definitions that are accessible and not jargony), etc.
^ something like that would be nice. Thanks!
It doesn't really work line by line. You need to understand what shorting is, what a short squeeze is and what naked shorting is.
Shorting is what you do if you think a stock is going to go down. Let's say you really like this company, but you think the price is going to go down today. The share is selling at $100 today. You sell your shares at $100, and after it goes down in price, say to $90 , you buy back in. Now you have slightly more shares than you would've otherwise. Shorting is basically doing this, but you DON'T like the stock, and don't want to have it after today. You go up to someone and say, hey I'll take that share off you, but I'll promise to give it back in a week. You buy the share from them and immediately sell it, and a week later, hopefully the price has gone down, you rebuy it and then immediately sell it back to your mate. You get to pocket all the profit (which is however much the stock went down in that time). The important thing is, you're obligated to buy it back, so if it has infact gone up in price, you're a bit screwed.
Everyone thought gamestop was going to go out of business, so tons of hedge funds and investors are shorting them, so when they go bankrupt they make a profit. I think gamestop's new CEO announced new plans to radically transform the business (selling PC parts, moving to online retailing more, etc), as well as them reporting 3x more online revenue than expected. So it was looking like gamestop is gonna turn the corner, and not go out of business. But a lot of funds are still shorting them, and they think this is a fad that will pass. But shorts do eventually have an obligation to cover the shorts/rebuy the shares they had sold. WSB knows this and is pumping up the price so that when they do have to cover and are obligated to buy back, the price will be astronomical because they HAVE to buy back.
You may be thinking, won't some people lose out? Shouldn't the price peak very quickly and then die out as everyone tries to sell? Not exactly. What has happened is, since everyone was so certain gamestop was going to go bankrupt, there are actually more shorts than shares are proven to actually exist. This is called naked short selling, and it's illegal, but commonplace. I don't really understand how this works, but since there are more shorts than shares actually exist, the price should peak for awhile, and it's not a TOTAL pump and dump. For more infinite short squeezes you can look at 2008 Volkswagen and 2020 blue apron
Hope this helps, although I might be wrong about a few technical details