If you have been watching the news lately you may have heard something about GameStop. Recently in the stock market, GameStop’s stock has dramatically spiked up, but why is this?
How did it start?
GameStop is a struggling company. It was a struggling company even before the pandemic. But people saw this as an opportunity to make money. Wall Street investors placed their bets against GameStop, using something called a short. But some other people saw this as an opportunity to screw over Wall Street and possibly make money. So then people started to buy shares in GameStop, driving up the price. People on Wall Street started to freak out, so they made more bets in hopes that people would see that and the price would drop, however, this didn’t work.
What is a short?
Wall Street saw that GameStop was a struggling company and they expected their stock price to drop. So, they borrowed GameStop shares then sold them immediately, and then agreed to buy them again at a later date, hoping the share price would drop. Now, that price difference from when they sold them and then bought them again is profit. But let’s say that price rises instead of falls, then they end up losing money, and so far that is what has happened.
WallStreetBets is something you may have heard about on the news or online, but what is it? WallStreetBets is the name of a subreddit on Reddit where people give out alerts on what stocks people should invest in, along with other things people should do with their money and stocks. This is also the place that made GameStop spike up as it did. There were people on this subreddit that were looking at GameStops situations and realized that they could screw over some hedge funds as well as make some money. “Finance guys have promised to buy so much GameStop stock that if it doesn’t go bankrupt or purchased by a private equity fund in the next three months they are going to have to buy GameStop stock at whatever the price it is,” said some guy on Reddit.
How much did people make?
Recently, as of Jan. 12, if you wanted to buy a share of GameStop it would cost you $20. Two weeks later, the price for a share went up to $348. A person on Reddit saw that GameStop wasn’t doing the best but he decided to make a risky move. In 2019, he bought $53,000 worth of shares in GameStop. This was when one share cost him $5. Not too long ago, his account had $20 million in it. He struck gold. There was also a 10-year-old who saw an opportunity and he put $60 into GameStop. Later on, he was able to pull $3,200 out, $3,140 richer.
What were their intentions?
At the end of the day, this was mostly a joke to the people of Reddit. Sure, some people made millions, but the goal was to give Wall Street a taste of their own medicine. But is this such a bad thing? No, because the only people it ends up hurting are Wall Street and not the people.
Wall Street has done this for years
People on wall street are getting mad at individual investors for screwing them over. However Wall Street has been doing this forever. They have always manipulated the system as people on Reddit and Discord have just done. But Wall Street has been doing this all underground and not letting people know, while people on Reddit are doing this publicly.