As I’m sure you’re well aware by now, GameStop made major waves this week. The video game-retail-dinosaur was on the verge of bankruptcy, causing their stock to hit an all-time low. Because of this, the Wall Street elite started to bet against them, making money on GameStop’s failure and reaping seemingly unethical benefits from their demise.
I’m not one of those finance bros, but I’ve met a lot of them and dodged many a rant about stocks in my day. So I’m basically just expressing what I know about the situation at a very beginner level. My knowledge of stocks goes back as far as The Wolf of Wall Street, but other than my killer Donnie Azoff impression, it’s not really my area of expertise. Because of these shortcomings, I had to do my own research.
To paraphrase Margot Robbie in that one bathtub scene from The Big Short, *cue Jordan Belfort fist in mouth*, shorting a stock is when investors borrow other people’s stocks and sell them in the hopes of buying them back later on to make a profit. This happens all the time—people even do this for a living, and lowering the value of a stock is a very common thing to do, regardless of how unethical I may think it is. However, it went way further than that in the case of GameStop, because the company started losing real value. But the hedge fund guys just didn’t care, and they kept doing it until they started making a lot of money at the company’s expense… which is where Reddit entered the conversation.
I’ve read 5 articles about what happened with GameStop and I still don’t understand it even a little bit which must be how my mom feels when I talk about Twitter.
— Ꮍᴀᴇʟ (@elle91) January 28, 2021
What had been brewing on Reddit for a number of weeks (seriously, this was a well-orchestrated event) eventually culminated in a mass purchase of GameStop stock, led by the subreddit r/wallstreetbets, taking place on January 27 into January 28. Regular people, like you and me, were eating this up. Maybe it was nostalgia for GameStop, maybe it was an “eat the rich” mentality, I don’t know, but what I do know is that people were hungry and to the moon they went. To give you an idea of the effect this maneuver had on the GameStop stock, it went from a value of around $18 to about $330 in a couple of hours.
Everyone wanted in on the financial fun, and after the GameStop stock skyrocketed, the crowd on r/wallstreetbets turned its attention to other “dying” companies, including AMC Theaters, Build-A-Bear, and even BlackBerry, to name a few. All of these companies whose stock had been in the dumps were suddenly making major market comebacks, and regular people quickly started making irregular money. And who did this hurt? You guessed it: those finance bros we were talking about earlier, who were counting on these companies to fail.
So let me get this straight: Redditors rallying GameStop is market manipulation, but hedge fund billionaires shorting a stock is just an investment strategy?
— Robert Reich (@RBReich) January 28, 2021
Naturally, the Wall Street crowd cried foul play, talking to any media outlet that would allow them to spin a story of greed and collusion, even calling the Reddit scheme an “attack on the wealthy“. How dare anyone else try to manipulate the markets that they’ve been manipulating for years! Before long, a popular trading app, Robinhood, started making it very difficult to place orders on GameStop and other suddenly-popular stocks. They even went so far as to glitch the site into not allowing users to draw funds, and making it impossible to do basically anything other than sell existing stocks.
Robinhood has since issued an apology to its users, saying these moves were made with everyone’s safety in mind. But given the intense pressure from the financial world, no one is really inclined to buy (pun intended) that explanation. Judging from Robinhood’s reaction to this week’s events, it’s clear that they’re not immune to the influence of the Wall Street elite, and it’s too bad. This week’s events were undeniably chaotic, and Robinhood may have considered a number of factors in their decisions, but their reputation as a great equalizer in the finance sphere has certainly suffered. The app received a tidal wave of bad reviews on mobile platforms, and the company has confirmed that the Google Play Store assisted them by deleting over 100,000 one-star reviews.
Say what you will about this ongoing story, but if nothing else, it got a lot of people into day trading, myself included. Just as a disclaimer, you should always research your investments and take educated risks, if you’re going to take any at all. Investments shouldn’t be treated like savings accounts, but they can be a lucrative and exciting way to grow your money. I like seeing the lines go green and I’ve heard that the red ones aren’t so good, but I’m still learning. Anyway, until next time, stonks.
Images: quietbits / Shutterstock.com; elle91, rbreich / Twitter