![]() ![]() This drew ire from many individual traders who felt that their profits were being capped by a system rigged to be in favor of old hedge funds. ![]() Users were temporarily prevented from selling GME, AMC, BlackBerry (BB), and several other stocks made popular on Reddit. Robinhood and a couple of peer brokerages instituted restrictions on trading of the more volatile stocks like GameStop in the immediate aftermath. When GameStop prices skyrocketed due to high volumes of trading activity, such investors who were holding a short position were “squeezed” as they scrambled to hedge their bets by investing long in GameStop and thus driving prices up further. ![]() However, institutional investors still make up as much as 80 percent of market capitalization. Robinhood, a popular free-trading app that eliminates brokerage fees and removes the information barrier, has made huge strides in bringing finance into homes across the nation. Investing has long been a contentious topic, with most of the wild newsworthy profit margins benefitting elite hedge fund managers and staid Wall Street firms. The stock grew so popular on the app that at one point, over half of all Robinhood users owned some GameStop stock. Buzzing interest in the chat about investing heavily in unexpected yesteryear companies like GameStop and AMC was translated into action as casual traders took advantage of user-friendly platforms like Robinhood. The past year has served as a perfect storm for the rise of the subreddit’s popularity, as the pandemic impacted the market in unforeseen ways and people staying in quarantine had the time for a new hobby. The self-described group of if “4chan found a Bloomberg terminal” is filled with memes, catchy trading lingo, and a particular focus on highly-volatile companies. The surprising source of the sudden rise was soon traced back to the depths of a foul-mouthed subreddit group called WallStreetBets, a chatpage home for amateur investors. If the prices rise instead, the borrowing investor must pay the lender the difference in prices out of pocket when the stock is returned, which is what happened on a magnified scale for many hedge funds. Short positions involve borrowing stock and selling it in the hopes that prices will fall and it can be bought back for cheaper and returned to the lender, allowing the investor to make the difference in share price as a profit. Then, on January 28, 2021, the GameStop Corporation stock (GME) hit a daily high price of $483.00, flummoxing institutional investors who had placed large sums of money in short positions on the stock, and lost so much on the position that financial giants Citadel and Point72 were forced to infuse $3 billion to keep the fund afloat. It was almost certain that the company was headed towards a graceful demise, as it had all but disappeared from the vocabulary of gaming enthusiasts. Gamestop, a video game retailer reminiscent of a different era, was gently fading into the past with its steadily declining share prices dropping as low as $3.09 in April 2020. ![]()
0 Comments
Leave a Reply. |