In three weeks, the stock went from being worth $18 a share to at its peak being worth nearly $350. That is more that a 19 fold increase in value, which is insane for a stock be that volatile in such a short period of time.
The reason for this insane jump in value of the stock can be traced to reddit and a few memes. A group called "WallStreetBets" on Reddit found out that a few major hedge funds put a lot of money into shorting Game Stop stock, and wanted to make these hedge funds lose a lot of money on this short. So, they had most likely millions of people invest some extra cash that they had into Game Stop in order to artificially make the stock go up in value. Some of these people ended up making upwards of 1 million dollars from this, all because of this Reddit group and the meme.
Why did these people decide to do this?
The motivations for these people trying to destroy hedge fund companies is seen by some as a way to protest the government always bailing them out when they fail, but not bailing the people out today when they are forced in some places to not be able to work and make money for themselves.
What ended up happening was that yesterday, a few major stock trading apps shut down the ability to purchase a share of Game Stop. Many saw this as unfair and Robinhood, one of the trading apps that did this is now facing two law suits for this, showing how much the people are outraged with Robinhood trying to protect these hedge funds.
Law makers are now set to meet about this and could potentially be adding more regulation to the stock market because of this. In my opinion, more regulation shouldn't be added because these hedge funds used similar tactics in order to have success. They would buy stocks low and tell people to invest into the stock even when they knew that it was not that valuable, and when it would get a lot higher, they would sell the stock, even as they told people that the stock was a good buy.
What is your reaction to this?
Link to meme song about this: https://youtu.be/rejpDqQUcV0
Sources:
https://www.foxbusiness.com/markets/why-gamestops-stock-surge-is-shaking-wall-street
https://nypost.com/2021/01/28/crowd-chants-f-k-robinhood-at-wall-street-protest/
This completely took over all of my social media pages for days. I do not have a lot of knowledge about the stock market and was pretty confused. You did a great job explaining the concept of selling and buying stocks. I feel as if Robinhood's actions shouldn't be legal. Having money shouldn't mean you can control a situation that got out o your hands. Why are they able to stop you from buying the stock?
ReplyDeleteHi Isaac, This is all that I saw on social media for days and I never really understood it. I don’t know much about stocks, but your explanation really helped me understand. I think it is cool that people took it upon themselves to destroy the hedge fund companies. I don’t think it is fair that they shut down the ability to buy the stocks though. Everyone should have equal opportunity and shouldn’t be take advantage of when they are struggling.
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