I am sure you guys know what this article will be about, over the past month, GameStop stock prices have surge like a rocket on full speed up. How it all started, I am sure everyone would have watched numerous videos and read many articles on it but I will give a short summary. Hopefully what I have interpreted is accurate.
Summary
Basically, it starts from this reddit page 'WallStreetBets' where they target short sellers. Redditors found out that GameStop was heavily shorted as the company sales have been slow and was expected to lose money as physical retail stores have suffered due to the pandemic although GameStop sells video games which have good sales due to more ppl staying at home. On 11 Jan 2021, 3 new directors were added and one of them being Ryan Cohen (from Chewy, an American online retailer of pet food and other pet-related products) who could bring a digital experience to GameStop and turn the business around. Ryan himself reportedly owns 9 million shares bought in 2020 at an average price of $8.43 for a total cost of $76 million at the time. Considering the current price, he has become a billionaire.
This is something that will go down in history
Taking financial classes or reading future financial books will have this event in it as redditors goes against hedge funds who have for the longest time always have the upper hand due to their sheer size and power. It is amazing how this collaborated push to buy the shares and hold it can make multiple hedge funds lose billions. Hedge funds like Melvin Capital suffered heavy losses over the GameStop saga, causing Citadel and Point72 (both hedge funds) to provide almost $3 billion to Melvin Capital. Melvin attracted the ire of Reddit users on Wall Street Bets. The financial systems have always been supporting the large financial systems, bailing them out when trouble hits and in this whole system why is it only financial institutions that can profit, redditors proved otherwise.
Robinhood halts trading
Robinhood announced it had restricted trading on certain stocks, including GameStop Corp. (NYSE: GME), AMC Entertainment Holdings Inc (NYSE: AMC) and others, sparking an outcry on social media. This is crazy because the platform just halts trading when so many wants to get in. I have heard many saying that class action suit would be filed to Robinhood.
"A class action lawsuit is a lawsuit in which a group of people with the same or similar injuries caused by the same product or action file suit against the defendant as a group."
Am I invested?
I am currently not invested in GameStop and don't think I will. It is exciting to be following up on the news and seeing how ppl's gains have skyrocketed. I do get a little shocked at how the price have jumped, it is by far the craziest profits I have seen over a short period of time. As more ppl get into, it will be more dangerous and risky. If you really want to jump on the bandwagon, allocated a small amount to it maybe at most 5% of your portfolio, to ensure if anything happens, the most you would lose is that 5%.
I have been in the WSB reddit every night seeing them work hard to tell everyone to buy and hold for GMC to hit $1000. It is amazing how one group of ppl globally can bring about such a huge impact all through this platform. Investing has really changed over the years as more people start to use investing as a way to increase their wealth exponentially through a short period of time. It is interesting and definitely something that will go down in history. How about you guys? Are you invested?
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References:
https://finance.yahoo.com/news/robinhood-ceo-trading-halts-made-001505664.html
https://edition.cnn.com/2021/01/28/investing/lawsuit-robinhood-gamestop-wallstreetbets/index.html
https://millerlawpc.com/class-action-lawsuit/
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