With the stock market game starting for many of the business classes at our school, I think it would be important to go over a large story about the stock market from recently. At the end of January, the stock market was in the news for a very unique reason. A group of people on the subreddit r/wallstreetbets caused a surge in the stock prices of Gamestop (GME), AMC (AMC), and Blackberry (BB). The largest of these surges was Gamestop’s stock which rose 1,700% in the few days before January 27th. The share price jumped from around $17.25 at the start of the year, to peaks of over $300. At the end of the last year, the price per share was less than $5! Blackberry and AMC, not to be outdone, rose 280% and 840%
respectively. In the stock market, the more of a company's stock is bought, the higher the price goes. The higher the demand and reputation of the company, the higher the stock price. The jump in these companies’ stock was all a snowball effect from the boredom of a group of traders who wanted to get back at some of Wall Street’s largest investors. They kept buying stocks in these companies, propelling the stock price. This caused more people to start buying in to “get rich quick” and lead to the jump in these companies' share price. Elon Musk also helped to perpetuate the rise with a tweet the day before Gamestop’s stock reached its peak saying, “Gamestonk!!” and a link to r/wallstreetbets. Numerous other large content creators also promoted the stock to their fans which contributed to the snowball. The stock price rising hurt these large investors because they were trying to short sell and lower the price of the stock.
Short Selling and Robinhood
This whole situation started because the people of r/wallstreetbets wanted to get back at the big investors on Wall Street for short selling. Short selling is the process of an investor borrowing a stock, selling it, and then buying it back to return it to the lender. This is an attempt to decrease the price of the stock but is risky because there is no limit on the amount of money you could lose. This usually hurts the smaller, average investors like those on the subreddit so it is understandable why they would want to get back at the larger investors at Wall Street. Those larger investors did not like this and a popular stock trading app, Robinhood, decided to support them.
Robinhood is an app made for the average investor to buy and sell stocks, and its company is named after Robinhood who stole from the rich and gave to the poor. With all that in mind, you can see why so many people were outraged when they blocked the buying of Gamestop’s stock on January 28th but still allowed them to be sold. Many of Robinhood’s users ended up leaving the app to find another way to buy and sell stocks. This situation was
one of the contributing factors to the price of Gamestop’s stock falling so much. The CEO of Robinhood gave a reason for the ban but it was very much unsatisfactory for all of the users that have lost money through the ban. They ended up deciding to lift the ban which did cause the price of GME’s stock to rise again, but this decision fell on deaf ears considering many of the app's users left and found somewhere else to trade. Robinhood is currently facing lawsuits for the money that traders have lost in this situation and big celebrities like Elon Musk and representative AOC have supported the backlash.
Conclusion
All of this has led the stock market into the very public eye again and could lead to more people getting involved in more shares than just Gamestop which will be good for the industry as a whole. The average traders have felt a lot more powerful after this situation since they have gone toe-to-toe with Wall Street and can do so again in the future. This has definitely made those larger investors and short-sellers seem vulnerable and have to worry about the average person.
Last Minute Update
The past couple of days have had Gamestop’s stock surging in price again. After the last jump, the stock fell to around $44 per share (which is still pretty high). At the time of writing, the stock is up to $101 with it reaching a peak on February 25th of $177. The general consensus for why this surge is happening is because of advertising by social media bots. There have also been some changes within Gamestop with their Chief Financial Advisor and vice president Jim Bell, announcing he will resign on March 26. This story is still developing.
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