News Category: Breaking News
- article written by Giulia T., a news team contributor
Chances are you’ve heard about GameStop. Especially their stocks. But if you’re anything like me, you probably don’t know what that means. Or the possibly ramifications of the situation. This article will attempt to explain the situation and hopefully show what will happen going forward. To read the full article, click here.
What is GameStop?
GameStop is a game retailer established in the 1980s with thousands of stores over the United States, Canada, New Zealand, and Europe. Due to numerous factors, including COVID-19, GameStop has been in decline and as a result, it’s stock price had been steadily going down. This ties into the next point.
You’ve probably also heard of this term. This is where the conversation loses most people, and it’s easy to see why. It’s a complicated trading strategy. Summarized, it’s when someone borrows stock from someone else, sells that stock to a third party, and then buys it back when the price has gone down. This way they can pocket the difference. It’s a risky move, as theoretically, the stock price could go up and keep going in, and one could end up in infinite debt.
So… how do GameStop and short selling relate?
Months ago, hedge funds (basically investors, for the the purpose of simplicity), betting on the fact that GameStop (GME) stock would go down, short sold a lot of it. Reddit and other social media users, specially Keith Gill who’s username won’t be shared for reasons of profanity, picked up on this and disagreed with how investors were treating the stock. This sparked a movement where Reddit users from the subreddit (a specific portion of the site dedicated to stocks) r/WallStreetBets bought GameStop stock, causing the prices to go up.
Basically, in case you didn’t get that: everyone tried to buy a certain thing at once, so, naturally, that price went up. This is called a short squeeze. And in terms of Wall Street, it’s made quite the shake. Since all these hedge funds shorted the stock, many of them are loosing money. As a result, there’s been quite a pushback from all ends. For example, the investor app RobbinHood restricted the buying of GME stocks, which has caused backlash by nearly everyone on the political spectrum.
In terms of raw numbers, GME has taken multiple dives in all directions the past week or so. On January 22nd, it rose up 69% perfect, putting each stock price at around 350 USD. But, during the past couple of days it has taken a dip of about 70% (stock price is at 90 USD as of writing this article). It seems like the ‘battle’ over this stock has come to an end. However, many Reddit users are still holding on. Only time can tell how this will end.
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