[imagesource: Jeff Roberson/AP]
A pair of professional investment firms, Citron Research and Melvin Capital, placed big bets that money-losing video game retailer GameStop’s stock would crash.
Well, that hasn’t panned out, after an army of smaller investors rallied on Reddit and elsewhere to support GameStop’s stock and beat back the professionals.
But, let’s start with more on what GameStop is before we go into the numbers.
GameStop is a company that sells physical copies of games. As most gamers know, purchases happen largely online these days, a feature which can be accessed through most gaming consoles/ accounts created with companies like Sony, Nintendo, or Xbox, depending on where your loyalties lie.
GameStop has now become what VICE is calling a “meme stock”, and the focus of a current “micro class war”.
A David versus Goliath type thing, if you will.
Its stock price jumped from $4 last winter to $20 at the end of 2020, then $40 two weeks ago. On Monday and Tuesday, it was worth around $100 at times and has climbed from there.
In practice this means we are seeing one of the largest wealth transfers from the financial ruling class to the middle and middle-upper classes in recent memory, so it is, understandably, the only thing anyone is talking about.
This happened when a group of Redditors in the r/WallStreetBets subreddit, run by someone with the handle ‘DeepFuckingValue’, took a look at GameStop stock and decided that it was undervalued.
The Redditors bought huge numbers of GameStop stock, trading at low prices, and then kept buying more as the prices rose, forcing something called a “short squeeze”, and elevating the price.
These Redditors are diamond-handing (holding) their stocks, imploring each other to not be a weak-minded stock seller (paper hands) and are waiting for their messiah Ryan Cohen—the CEO of Chewy.com who invested millions in GameStop last year—to hitch them to his rocket and take them to the moon/sun/Mars (become very rich).
According to The Financial Times, trading this month, which they say has “taken the stock’s gain in 2021 to almost 1 800 per cent”, is an example of how an army of day traders can “weaponise financial derivatives” to their advantage.
On Wednesday, by midday trading, the stock was valued at $353 a share. Accurate to the close of trading yesterday (4PM EST), the shares were sitting at $347,51 apiece.
CNN says that the stock has soared “more than 400% this week” alone.
The price over a five day period leading up to the price at 4PM yesterday looks like this:
View a larger version of the graph above here.
The r/WallStreetBets subreddit, which started it all, briefly went private, citing “technical difficulties”.
“We are experiencing technical difficulties based on unprecedented scale as a result of the newfound interest,” said a message on the WallStreetBets subreddit, adding that enforcement of the forum’s rules and Reddit’s content policy became increasingly difficult. “WSB will be back,” the moderators added.
It’s back, and shortly after it went public again on Wednesday evening, the administrators posted about the struggle to manage the rising popularity of the group.
“We have grown to the kind of size we only dreamed of in the time it takes to get a bad nights sleep,” they said.
“We’ve got so many comments and submissions that we can’t possibly even read them all, let alone act on them as moderators.”
Think of it as an ant colony – an individual might not be able to do much, but get an army of people together and you can move an incredible amount.
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