Gamestop: Who won the fight between hedge funds and ants?

‘Game Stop’ shook the US stock market. Gamestop is a company that operates a video game store and has been forgotten in the online era. How could the stock price of such a company soar?

GameStop is a game retailer that sells game-related products such as video games and consoles.

It is like a sacred place for millennial youth, which once existed in every shopping mall in the United States.

Usually, when stocks skyrocket, there are business reasons, such as new technologies or new business announcements.

However, GameStop has not had such an announcement recently. Due to the novel coronavirus infection (Corona 19), the business continues to be sluggish.

Gamestop recorded losses in 2019. It was scheduled to close more than 1,000 stores by March.

Reddit is a social media site like Twitter and Facebook. It is a form of discussion with continuous threads, and there are discussion rooms for each topic such as drama, soccer, history, and stock.

One of these is’Will Street Betz’. This forum is where individual investors complain and share advice and tips. There are over 4 million subscribers in this room alone.

As mentioned earlier, GameStop is not a good company. No more companies have received’non-face-to-face benefits’ from Corona 19. Who goes to the mall and buys game packs these days

In this situation, some hedge funds started short selling in anticipation of a decline in the company’s stock price from the end of last year.

Short selling is an investment technique in which stocks are borrowed and sold in advance, and later, if the stock price actually goes down, they are bought back at a lower price and repay the borrowed stocks to make a margin.

An easy example is this. Imagine you borrowed a Pokemon card from a friend for a month. But you’re selling that card to someone else for 5,000 won.

A few days later, a new card pack was released, and the value of the card sold at 5,000 won fell. Then, you can buy the previously sold card again for 3000 won. This is to leave a margin of 2,000 won.

Yes. On the contrary, if the stock price rises, short selling results in a loss.

News that some hedge fund companies are going to sell GameStop shorts spread to the Wall Street Betz, and individual investors started buying GameStop shares.

In particular, after Elon Musk, Tesla’s CEO, mentioned’GameStop’ on his Twitter on the 27th, GameStop’s stock price jumped significantly.

The aggressive stock price of individual investors surprised everyone. Other companies with a large portion of short selling of hedge funds have also been targeted by individual investors.

In the end, hedge funds with a large short selling to Gamestop suffered a huge loss.

It is estimated that this phenomenon occurred because individual investors mobilized to fight the short selling forces.

A popular Reddit thread says that this was a revenge against the financial companies that caused the 2008 global financial crisis.

Financial analyst Neil Wilson noted the “vigilante morality” of some individual investors.

“They are desperate to take Wall Street. When you hate hedge funds and walk into the debate room, you’re full of insults for easy money earned by financial people. It’s also an intergenerational fight. We want to take the money from the rich and redistribute it to millennials who have no money.”

However, the aftermath spread to the entire stock market as hedge funds, which suffered massive losses in the workshop, began selling other stocks held by them.

On the 28th, a controversy arose when Robin Hood, a US free stock app used by individual investors, blocked new purchases of some stocks, including Gamestop, and only allowed them to sell. Another free stock app’Interactive Brokers’ has a similar policy.

The US government and regulators also expressed concern, saying they are watching the situation.

White House spokesman Jen Saki said on the 27th, “The economic team of Treasury Secretary Janet Yellen and Joe Biden’s administration are watching the stock market and stocks showing abnormal trends such as game stop.