The Rise and Fall of GameStop Stock
Brianna Lopez, Staff Writer
If you haven’t already heard, there is a large conflict involving Wall Street and GameStop. To get you caught up, here’s what has happened; Hedge Fund Melvin Capital made a bet that GameStop’s shares would drop. If this worked, Hedge Fund Would make a lot of money. Wall Street Bets, a community on Reddit, found out about this. GameStop is one of Wall Street Bets most preferred meme stocks. The bets from Hedge Fund did not sit well with Wall Street Bets, therefore leading Wall Street Bets to buy as many stocks as possible and hold them. With more stocks being purchased the more stocks Melvin Capital had to buy back. As a result of Melvin’s arrogant confidence, they went all-in when it came to placing bets, leading them to lose 53 percent of GameStop during the whole frenzy (cnnbusiness.com).
Not only did Hedge Funds, such as Melvin Capital, target GameStop, but many others did as well. However, each one of these stocks were then targeted by GameStop and eventually “got burned” as stated in the CNN Business News article. As of February 8, 2021, Redditors have raised $250 million due to their current role in the events that have been taking place. Although there is no way of telling what Reddit’s financial standing is now, just know that as of Monday the direct advertising revenue increased by 90 percent (yahoo finance).
Continuing with the Hedge Funds, they had a ton of others helping them out so that they wouldn’t go bankrupt. Buying and holding the stocks brought up prices to over $400 a share, which could make investors a lot of money. This Hedge Fund, which happens to be backed up by a bank, ended up losing a lot of money because of said events.
Many Redditors used Robinhood, a stock buying and trading app, as a main source of buying GME stocks. When Hedge Fund started losing major money, the app started enforcing restrictions on certain stocks, specifically GME. The stock was no longer allowed to be purchased, only sold. This caused outrage from the buyers, who viewed this as Wall Street trying to stop them. The Twitter account connected to the Wall Street Bets reddit expresses their irritation, saying “Individual investors are being stripped of their ability to trade on [the Robinhood app],” the tweet said, “meanwhile, hedge funds and institutional investors can continue to trade as normal.”
Robinhood was quick to explain that there was simply not enough money to cover the large increase in stock trading. Robinhood claims “It was not because we wanted to stop people from buying these stocks. We did this because the required amount we had to deposit with the clearinghouse was so large”. It does seem to be a reasonable explanation, but at the same time, it was definitely a weird coincidence that when the major players of the stock game are losing money, their opposition gets negatively affected.