12/18/2022 0 Comments Vox gamestop![]() The House Financial Services Committee is hosting a virtual hearing on GameStop, with the major players in the incident attending. Wall Street bigwigs and ordinary people alike are wringing their hands. Federal and state regulators are reportedly probing various aspects of and players in the saga. So have the White House and the Federal Reserve. The chaos reached such great heights that the trading platform Robinhood and others halted trading on GameStop and other super-hot stocks temporarily, sparking conspiracy theories about their reasoning and, likely more accurately, igniting concerns about how they could be so unprepared for what happened in the first place.Ī litany of lawmakers have weighed in on the drama, including Alexandria Ocasio-Cortez, Ted Cruz, Elizabeth Warren, and Ro Khanna, seizing on the populist appeal of the matter, the David vs. Some guys on a raunchy Reddit forum called WallStreetBets helped to drive up the price of a mall-based gaming retailer to the point that they cost some big hedge funds a bunch of money. That the saga itself could even happen feels pretty wild. But there’s not much consensus around what that something should be - or what the problem is in the first place. “Some of the users can now pay off their car notes, student debts, feed their kids and pay their mortgages,” r/wallstreetbets moderator Stylux said in a statement to Vox.Plenty of smart people think that someone should do something about whatever happened with GameStop in January. While some are calling the situation illegal, lawyers confirm it does not violate any law because these platforms are difficult to police.įor many small investors, this money made an important difference in their lives. On the other hand, well-respected hedge fund Melvin Capital was down 30 percent in the first few weeks of January and needed to be bailed out by other funds. ![]() Within days, GameStop’s market value soared from $2 billion to $24 billion, with $10 billion gained in one day and stocks increasing 1700 percent since December. The increased demand further raises the price. By buying the GameStop stock, they forced investors to buy back their stock at a higher price. The reason r/wallstreetbets was able to reverse this effect, despite all of the hedge fund money stacked against them, was because of an effect called short squeezing. Wall Street analyst and owner of investment newsletter Citron Research Andrew Left called people who were buying GameStop stock “ suckers at this poker game,” as he and many others were making money off of the price decrease. However, hedge funds dismissed the subreddit, a mistake that would later cost them. ![]() Shorters buy the stocks back later so that they can return them, hopefully for less than they sold them for, allowing them to keep the difference. These investors make money by borrowing stocks and selling them immediately. Shorting is when investors stake money that stock prices will go down and make money off of how much the stock decreases in price. They chose to invest in GameStop because many large investors, particularly hedge funds, were shorting the company. Members of the subreddit bought shares of GameStop because they knew that the price would go up due to the increased demand, funding GameStop in exchange for equity, or partial ownership, in the business. ![]() The users coordinated the mass buying of GameStop’s shares. The subreddit is a product of the increasing accessibility of stocks, also known as shares, in past months, due to free advice spread on the Internet. The subreddit is doing the same thing now to AMC, Blackberry, Express and Tootsie Roll, having already raised AMC Theatre’s stock price 840 percent and Blackberry’s 280 percent. ![]() Between Wednesday, January 20 and Wednesday, January 27, the company’s stock surged from $39.21 to $347 through enormous investments from the subreddit’s users. R/wallstreetbets, a now-private subreddit of three million users dedicated to spreading information about investment, has increased video game retailer GameStop’s stock price ninefold. R/wallstreetbets members bought a significant amount of GameStop shares, increasing the price of the shares and causing large investors who bet against the stock to lose money. ![]()
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