It’s pretty safe to say that the entire world has come to a stop because of GameStop right now. Nobody is immune to the crazy news circling around this company. If you have also been bitten by the GameStop curiosity bug, this post is here to help. Let’s get started with it.
GameStop: What On Earth is Happening?
What is GameStop?
GameStop is an American high street shop that is a retailer of games, consoles and other electronics goods. GameStop is a kind of shop which you will find nestled in a mall between a clothing store and an ice cream parlour in an American mall. It’s not a new or radical brand that has the power to be a market disruptor. As a matter of fact, the retailer had been struggling because of the COVID-19 lockdowns.
What has Reddit got to do with GameStop?
Reddit is a social media website that has a lot of discussion forums that are called “subreddits”. The subreddit which had an impact on the GameStop saga is called wallstreetbets. The subreddit has over four million people in it and they discuss stocks, shares and other investment tips on it. As mentioned previously, GameStop was struggling real bad because of fewer people out shopping due to the pandemic and most games being sold online. The company’s future looked quite bleak to be honest.
Now, if you ask people who buy and sell stocks regularly, they usually bet on stocks which are not expected to do well in the future. They borrow shares in the company and sell them, with a promise to buy them back at a later date. If your estimate comes true and the company loses value, you will make a lot of profit when you buy the shares back when the prices drop
This process is known as “shorting” or “short selling” in the stock market. These words must’ve cropped up in all your social media news feeds these days. In a way, it’s like gambling. If you bet and it turns out to be wrong, you will end up losing a lot of money.
GameStop was one of the companies that loads of hedge funds (companies who do these bets) had bet on to lose a lot of value. However, a large number of users on the wallstreetbets subreddit swapped tips and purchased GameStop shares, pumping a lot of money into the company. This incredible rise in demand saw a massive increase in the share price and all hedge funds that had counted on GameStop’s share dropping in value, had to purchase their shares back.
What’s Elon Musk got to do with this?
Well, Elon Musk’s social media game has always been on point, especially on twitter. Whenever Elon Musk tweets, the world notices. His tweet on the GameSpot scenario pushed the stock to further heights.
So what happened in the end?
For a lot of people involved with the whole event, it was nothing more than a hearty laugh. A little bit of excitement and a great way to pass time. It was also a fantastic display of the power held by internet communities. Wall Street commentators also had choice words for this event. They called it a “phenomenon”, “insane”, and like “nothing [they’ve] ever seen”.
For many people on the subreddit, one of the main aims was to make sure that stockbrokers and hedge funds lose a good chunk of money. Popular threads on Reddit include people saying it was payback – taking revenge against the big money companies seen as causing the financial crash in 2008.
Analyst Neil Wilson pointed out the “peculiar vigilante morality” of some of the traders. He said:
“They seem hell-bent on taking on Wall Street, they seem to hate hedge funds and threads are peppered with insults about ‘boomer’ money. It’s a generational fight, redistributive and all about robbing the rich to give to the millennial ‘poor’.”
A lot of people on the subreddit also said that they donated their quickfire earnings to charity as well. And last but not the least, the GameSpot situation gave us a fantastic supply of memes and perhaps stirred the interest of a lot of people in the stock market.