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[quote=Anonymous][quote=Anonymous]This whole story is so intriguing. If only I had a basic understanding of the stock market so that I could follow along. [/quote]

There are a million nuances but these are the main points:

[b]Shortselling: [/b]

Today, hedge funds borrowed 5 apples and sold them at $10 an apple. So they had $50. They agreed to return the apples tomorrow. They hope that tomorrow the apples will cost $8 an apple. So they would use $40 to buy back 5 apples and return the apples, keep the difference at a profit of $10.

The plan:
Borrow 5 apples, and sell at $10 each. Get $50 (5*10) . Buy 5 apples back at $8 each. Get $40 (8*5). Return 5 apples to owner. Keep $10 profit (50$-$40)

The problem: 
Those who own the apples decide that they will only sell at $1000 an apple
Now hedge funds are looking at:

Borrow 5 apples and sell at $10 an apple. Get $50. Buy apples back at $1000 an apple. So now they need $5000 to buy 5 back. But they have only $50  from the sale of 5 apples. Where do they get $4950 to buy the apples back ($5000 -$50)?

[b]Now RH comes in
[/b]
For several reasons RH stops apple purchases on its app but does not restrict selling. And many of the owners of the apples use RH's app to buy and sell apples. It can take a few days to set up buying and selling on a new app. So owners of apples are not happy because if buying is restricted and selling is not, then the price should go down since there is less competition for apples.

RH seems to have cash issues with the increased volume of buying and selling apples. Some believe that RH intentionally does not want people to buy anymore apples, so that the hedgefunds have less competition in buying to pay their debt.  RH serves the owners of apples who use its apps to buy and sell apples. However, RH also serves the hedge funds -it sells  data from those who use its apps to hedge funds.

Here we are. The owners of apples don't want to sell(or what to sell at a highly exagerrated price). And hedge funds need to buy but want to buy at a "reasonable price". Some have already bought within the past weeks.

Potential villains:

1. RH who restricted buying and thereby reducing competition for the hedge funds (since hedge funds do not use RH for purchasing apples, hedge funds can still buy while many others cannot).

2. Hedge funds who borrowed and sold too many apples without foreseeing that the owners of apples may not be willing to let them buy at a lower price when the hedge funds debt was due. It's not like this has not happened before (See Volkswagen short squeeze).

3. NYSE and regulators of the stock market: They are so reactionary that they could never have seen this coming even if it hit them in the face. In fact, it did hit them in the face (see Volkswagen)- shortselling could have been severely limited after the Volkswagen situation, or it could have been completely restructured to prevent this situation.

4. Current owners of apples who are seen by some as unreasonable for only wanting to sell apples at a very high price. There is also the reality that several of these people will be left holding overpriced apples when the hedge funds have bought whatever they need to pay back the borrowed appples. [/quote]

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