JOSE ROMERO
campus editor
GameStop has been a struggling business for a couple of years now. They have been
laying off numerous amounts of staff members including district managers.
In November 2019, I bought Gamestop stock for about $6 a share. This past week, it reached over $200.
I ended up selling my shares last September with about an 80% return, but if I would’ve waited, my returns could have been over 1000%. I try to laugh it off, but the wound is still fresh.
The sudden increase in Gamestop’s share price isn’t because people finally saw value in the company, but because of a Reddit group of 2.5 million users called “r/WallStreetBets.” The community came together in protest of hedge funds by flooding Gamestop, Blackberry and AMC’s shares on a stock trading app, Robinhood.
In doing so, they ensured that institutional investors don’t make any money off of their short positions — placing bets that stocks will drop. Short sellers have lost $19 billion during this fiasco, according to Business Insider.
A way to combat losing money from failed short positions is by buying shares,
which raises the stock price. Individuals continued buying shares to anger companies like Melvin Capital, a hedge fund that was shorting Gamestop. The response by Melvin Capital and other hedge funds resulted in the value rising again because they’re now also buying shares to counter the money lost from shorting.
It’s a game of cat and mouse where there doesn’t seem to be any losers because, in actuality, hedge funds are investing as well, so they’re recouping the initial losses.
That’s not the end of it. Robinhood has now halted purchases of shares in Gamestop, AMC and Blackberry because of the volatility. Reddit users have responded to the new restrictions with a classaction lawsuit against Robinhood for market manipulation.
The eruptive nature of the current market has elicited a response from the U.S. Securities and Exchange Commission. They said that they’re “Aware of and actively monitoring the ongoing market volatility in the options and equities markets.”
It is uncertain what the response will result in, but this event will go down in history. As
in r/WallStreetBets, “To the moon.”
