So this article is going to tell the story of how average hard working people have been hoodwinked, bamboozled, run a muck, led astray, and flat out deceived by the powers that be. (Shoutout Stephen A. Smith) Let’s get right into it…
By now we all know what GameStop is, if you don’t it is an American high street shop that sells video games , consoles and other electronics.
As or it’s connection with Reddit, which is a social media site a bit like Facebook or Twitter. On Reddit you choose what forums you want to be part of such as basketball, economics, or even a flat earth forum. On these forums you can discuss these topics with other Reddit users. This story revolves round a very specific forum called wallstreetbets, which has over four million users. On this particular forum people discuss the stock market and where they are going to invest their money.
Right so just so you can understand what happens in trading. When a company is not doing so well, people like to “short” it, which essentially means to bet against it. This consists of borrowing shares in the company only to sell them, with the promise of buying them back at a later date. The idea is that buy selling them at a high price and then buying them back later after the company hasn’t performed well in the market and its share price has gone down, you will make a profit and still have the shares in the company but for much less.
So, how did it go wrong? Well, GameStop is a company that was predicted to not do very well. So a lot of hedge funds had assumed a short position on the company waiting for the inevitable plummet in GameStop share price (or so they thought). Users on Reddit caught wind of this and started tipping off others on the platform. This led to a large number of people buying shares in GameStop. As a result of this, instead of the share price decreasing (as it was predicted to do) increased drastically. This put the Hedge Funds involved in a very precarious position because they were now making a loss since they had to buy back their shares. In the meantime a lot of people stood to make a lot of money, because they had bought GameStop shares at a low price and now their shares were worth thousands. Big Win!
Obviously the people on Wall Street weren’t too happy with the amount of money they were losing and so put a stop to this. Platforms on which people were able to buy and sell stocks were closed making a lot of people very unhappy. Essentially the hedge funds were annoyed because they were beaten at their own game. Hedge funds accused the Redditers of stock manipulation however, the Redditers responded with the simple acknowledgement that this is what the people on Wall Street have been doing for years. That is how they’ve been able to make so much money and be successful. Now some see this as a Robin Hood story since some of the people that did make money from these events actually donated their profits to charity. Others said they were taking from the rich and giving to the millennial poor as revenge for the 2008 stock crisis (if you don’t know too much about that, the movie “The Big Short” is a really good explainer and also quite entertaining). I see it as a great read on Twitter and the people sticking it to the man. I’m also quite keen to find this forum on Reddit as well so I can add some stocks to my portfolio, maybe they can help me out too.
Anyway, that’s all for this topic. I hope this was informative as well as entertaining and I will be back with more soon.
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