If you noticed that a discussion about Gamestop, Reddit and Wall Street suddenly sparked on social networks, but you haven’t had time to follow up, here we are to summarize it in the simplest way.
Gamestop is an American chain of video game stores that has struggled to survive in recent years, due to the rise of digital formats and purchases on online platforms.
The COVID-19 pandemic ruthlessly impacted the chain and while many assumed that its days were numbered, several investors saw the opportunity to “play short” or short a stock, that is, to sell the borrowed shares when their price is high and then buy those same stocks at the lowest possible price in order to keep the difference and increase your wealth.
That is what several Wall Street players wanted to do with GameStop, but the Internet is a space in which people can organize for a common purpose, which in this case was to turn the tables on investors who wanted to take advantage of the situation of the chain.
On 22 January, the value of shares of GameStop broke the record that the chain reached in 2007 when his situation was prosperous. In that year its value was $ 63.30, but that day the figure reached $ 76.76. On January 25, the stock continued to rally, reaching $ 159.18 per unit.
https://twitter.com/MatPiscatella/status/1354169414455750656
Why did GameStop’s share value suddenly go through the roof? This is the work of the folks who coordinated through Reddit, specifically the r/wallstreetbets subreddit, described as “if 4chan found Terminal Bloomberg.”
“Well, in Reddit we have agreed and we have taken off the price of the share from about $ 10, up to $ 300 today. The idea is easy, to buy stocks and not sell, “ says Twitter user CokeJorge_.
These coordinated purchases and speculation caused the value of GameStop shares to inflate, forcing investors to buy them back at a high price, resulting in an upward value circle where it is necessary to buy in order not to have to. when the prices are even higher.
In the long term, the bet to sell short creates the idea that the company is so in a crisis that it is vital to sell all the assets, in the shortest possible time.
The impact of the action of this nature can be catastrophic in the stock market world.
CokeJorge_ himself refers to the way in which the investment firm Melvin Capital recorded losses estimated at 30% of the value of the company.
And while attacks are reported to disrupt the rise in the value of GameStop, the truth is that, in the speculative arena of the stock market , the Internet can be a differentiator.