User action on WallStreetBets subreddit has dramatically increased the stock price of video game retailer GameStop.
Reddit users have pushed their share price from $ 20 on January 11 to a staggering $ 146.97.
More specifically, the company has found itself to be the central catalyst for the battle between short-selling and online traders.
What is GameStop?
Gamestop is a video game retailer in the United States. In the midst of a pandemic, when the company’s physical stores are struggling, it’s a target for amateur traders.
According to Bloomberg, the store wasn’t expected to make a profit until 2023, but in three weeks its market value tripled to $ 4.5 billion.
What are r / WallStreetBets?
WallStreetBets is a subreddit (small community) of the social media app Reddit. Platform users have been trading stocks over the past few months, treating the market as a “roulette wheel” rather than a long-term wealth strategy, Vox reports.
What happened to GameStop’s stock?
As one Reddit moderator told Wired, GameStop’s stock was a “really exploding meme stock.” The company is struggling financially both before and after the pandemic, and many analysts have offered to sell shares to profit from falling stock prices.
However, as Ars Technica reports, investor Ryan Cohen, who had previously invested in safe stocks such as Apple, bought a 10% stake in retailers and got a lot of attention. Cohen bought enough to reach the board and urged the company to expand its e-commerce presence.
Wired reports that as inventory increased, shortsellers realized that they had to buy more stock to cover their borrowings. This is known as a “short squeeze” when an investor betting on a rise in stock price tries to make up for the loss and the stock price rises.
Eventually, GameStop seemed to fail, but it didn’t, and things got worse, and individual stock buyers at WallStreetBets began pushing up stock.
What happened to Citron Research?
The advice invested in Reddit laid the foundation for GameSpot updates, but it was the prospect of fighting traditional short-sellers that actually triggered the most unusual behavior around GameSpot stock.
Andrew Left, the founder of Citron Research, said, as Wired reports, Suggestion The stock price will drop from $ 41 to $ 20. “We understand and explain less interest than you,” he said in a private video now, “someone at a failed mall-based retailer is showing the other side of the deal.” I’ve never seen people who are particularly angry. “
According to Corey Hoffstein, Chief Investment Officer for Quantitative Investment and Research, this has created tensions between Wall Street Bets and Citron Research, where Reddit users basically buy stock and the market is driven by basic values. We are fighting against the traditional view of Wall Street. Newfound Research, a company that talked to Wired.
Responding to the controversy simply pushed up inventory, and GameSpot ended Thursday at $ 65.01. It’s probably not sustainable, as WallStreetBets finds other profits, but those who bought into the hype market saw paper profits from their move.
According to Bloomberg, a WallStreetBets user claimed to have passed on an investment of about $ 55,000 in the GameStop call option to a $ 11.2 million paper property with WallStreetBets moderator Bawse1 and told Wired at WallStreetBets “Nobody. This is the first time in a few years that he has made money. ” ”
GameStop: How Video Game Company Shares Increased 10x in Battle Between Reddit Users and Wall Street Bankers
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