HP Bagpipe

HP Bagpipe

HP Bagpipe

Stockmarket Frenzy Creates Trouble For Finance World

Reddit gamers cause dramatic stock market shift
Photo by Austin Distel on Unsplash
The stock market is seen rising rapidly on the computer screen, as GameStop soared dramatically in one week. The stock’s rise was due largely to a short squeeze driven by individual investors who coordinated their buying efforts on sites such as Reddit and Twitter.

Day traders are sparking a revolution on Wall Street after individual investors started piling shares of GameStop, taking a lead from a forum on Reddit named WallStreetBets last week.

In January, GameStop shares soared nearly 2,500%, from $18.83 to $484. The rise was amplified by purchases of call options, which allows the buyer to acquire shares at a set price at a point in the future.

Investors were using brokerage websites such as Robinhood, which allows customers to buy and sell without paying a commission. The surge in trading raised GameStop’s value by more than $10 billion on Jan. 27 alone. However, the next day, several platforms like Robinhood placed restrictions on trading. The shares soared again on Friday as restrictions were eased.

Small investors on Reddit overwhelmed stocks on multiple threads, including the now-famous WallStreetBets. WallStreetBets has become notable for its profane nature, aggressive trading strategies and their role in the GameStop short squeeze that caused losses on short positions in U.S. firms topping $70 billion.

A share in the Game Stop community was at a historic low of $3.30 in early January. Now, it has risen as high as $492.02 per share. 

This surge led to Reddit investors making millions of dollars and hedge funds losing millions.

According to CNN Business, Melvin Capital’s hedge fund lost 53% in January. The company started the year with approximately $12.5 billion in assets and dipped to $8 billion after recent events. 

But in early trading on Wednesday, GameStop’s stock price slid below $90 as shares, falling 81% in less than a week. That erased nearly $29 billion in the company’s stock-market value, which at its height last week, had a market capitalization of $35 billion. On Tuesday, that market value sank to $6.3 billion.

“The impact of social media in the markets really affect the future of trading, but the GameStop stock will continue to keep going down like it is now,” AP Global Business student junior Ava Murphy said.

According to CNBC, short-selling hedge funds have lost $19.75 billion this year due to this event. 

This week, silver is the new GameStop, according to CNN Business. People on WallStreetBets and the Reddit community who started the movement have laid their eyes on silver and the iShares Silver Trust. 

Business Insider reported the price of silver jumped by 13% on Monday to $30.35 per ounce. This is the highest price recorded since 2003. 

On Monday, Netflix announced that they are finalizing a GameStop stock movie about the saga. The company is negotiating with film writer Mark Boal, and actor Noah Centineo is interested in playing a major role.

About the Contributor
Reese Greenlee
Reese Greenlee, Web Editor-in-Chief
What is her go-to Starbucks order? Her order is an iced soy milk latte with caramel. What are her favorite news sources? Her go-to news sources are Vice News and The Economist.  What is her favorite dessert? Her favorite dessert is cookie cake.