Gamestop Stock Rises as Redditors Challenge Wall Street

Customers+walk+out+of+gamestop%2C+the+recent+focus+of+a+financial+fiasco+on+Wall+Street.

Customers walk out of gamestop, the recent focus of a financial fiasco on Wall Street.

Gamestop, a video game retailer, recently became the center of an unprecedented struggle between amateur stock traders and hedge funds in the stock market. The company’s stock price had risen an astounding 8000 percent over six months, causing a frenzy on Wall Street with billions of dollars at stake. Gamestop’s stock price has decreased greatly since January, however, the impact of the incident still lingers.

For many years, Gamestop was gradually declining due to the shift towards buying games online and attracted the attention of short-sellers. Short selling consists of investors borrowing shares of stock to sell and later buy them back to return. Essentially, they make a profit if the stock prices decrease, and bet on the company’s failure. Short selling is a risky investment as any increase in the company’s stock price minimizes the profit one makes, and can even leave them in debt. 

The Reddit forum called r/wallstreetbets or WSB played a huge role in the recent upset. WSB is a place for amateur investors to make predictions about the market, discuss stocks, and offer ideas. They encouraged one another to invest in Gamestop stocks and push it “to the moon”, a phrase created by WSB participants. Other companies targeted by short sellers such as AMC Theaters, Bed Bath and Beyond, and Blackberry also experienced a huge increase in stock prices. Many users said the main motivation behind the movement was to take revenge on the financial elite who have manipulated the stock market for years at the expense of others. 

With the massive influx of investments, Gamestop’s stock skyrocketed to over $380 causing huge losses for the short sellers who had bet against the company. One estimate said that short sellers lost $23.6 billion on Gamestop. This struggle may have larger implications for the stock market as a whole. Some predict that it signals a future in which average people become more involved with the stock market and social media influences investing. 

However, much controversy resulted from this frenzy. Robinhood, an app created for amateur investors and used by many WSB users, is currently facing a multitude of lawsuits for restricting users from purchasing Gamestop shares. Robinhood stated that the closure was due to US Securities and Exchange Commission or SEC’s net capital obligations, however, many argue that this claim is merely a farce and it was a restriction of free trading. Junior Zach Yusaf who follows WSB and has been investing since sixth grade said, “I think that the head of Robinhood was in the wrong. If the people want to increase the price of a stock and profit off of it, then the supposed ‘free market’ should reward them, not protect large corporations that profit off of the labor of low-income citizens”.

WSB and Reddit could also be facing lawsuits for market manipulation from the SEC. The SEC released a public statement noting that they will closely review the situation and affected parties, although experts predict due to the complexity of the case a consensus might take years to reach.