Photo by Clay Banks on Unsplash
As the result of gaming going mostly viral it’s not surprising that GameStop has been a dying business for some time. So it’s no surprise that investors would want to manipulate its stocks for a profit. What they didn’t expect, however, was for average people on Reddit to see the writing on the wall and stop investors right in their tracks.
GameStop blew up because of chats on Reddit called “wallstreet bets”. A Group of people noticed that on this specific chat there were people who are called “Short Sellers” that were betting that the GameStop stock was going to keep decreasing. A Short is when you borrow a stock from a broker and sell it immediately at its current price. Then you hope the stock’s price falls such that you can buy the stock back at a lower price and return the shares you borrowed to your broker but keep the difference. The catch here was that when this happens the average person does not usually jump on the opportunity because they are not sure how it will play out or they get intimidated by the industry short sellers.
Thanks to Reddit and the power of the collective on the internet, people were buying up stock for GameStop like crazy. This causes something that is called “Short Squeeze”. What then happens is all those short sellers who betted against GameStop have to cover their short and buy the stock once again, but when buying it you buy it for a higher price which then allows the stock to go up even more. So instead of making money they now owe the difference, which is a lot, which could put them in bankruptcy. The part that makes all of this interesting is that the people buying the stocks are people who haven’t even typically invested in stocks or have not really been involved much in the stock market.
These individuals have made a huge dent on the GameStop stock and on short sellers bets. But not only did these individuals buy GameStop stock, they bought multiple companies that have been struggling like AMC and Build A Bear Workshop. Now here comes the controversy. Stock trading platforms have stopped people from buying anymore stock from GameStop, which literally only helps the rich. This new manipulation of the market speaks volumes. It’s okay for those in power to manipulate the market, but when the every day person tries to flip it around it’s “not fair”. In a free-market economy shouldn’t the playing field be fair across the board?