Everything You Need to Know About the GameStop Story

As such, the overriding narrative that has since emerged has not been entirely dissimilar to “David Beats Goliath”. A forum full of internet dwellers took on the behemoths of Wall Street—and won. The history of financial markets has been littered with examples of painful short squeezes. But what has been particularly noteworthy about the GameStop episode—and certainly in contrast to the Volkswagen short squeeze—is that the stock surge was mostly driven by many small traders rather than a few big ones.

  1. “The reason why that’s important is if there’s people betting the stock is going to go down, and if they’re wrong and the stock price gets pushed up, then what will happen is eventually they will capitulate and they will give up,” Moallemi said.
  2. “This has captured the attention of America and every trader and non-trader alike,” Left said.
  3. GameStop’s Australian division has been focused on increasing higher-margin merchandise and opening more large format hybrid stores which include both an EB Games and Zing Pop Culture store in a single location.
  4. “Likewise, issuers must ensure compliance with the federal securities laws for any contemplated offers or sales of their own securities.”

Gill also posted screenshots of his GameStop portfolio on r/wallstreetbets as far back as 2019. Gill and other members of the forum also cited the bullish GameStop stance of Michael Burry, the legendary trader who was portrayed by Christian Bale in the https://www.day-trading.info/synergy-fx-review-2021-traders-ratings/ 2015 film “The Big Short,” as fuel for their investment choices. Most of the traders who have been piling into the stock are likely chasing easy profits, and probably do not care whether GameStop’s strained business could make a miraculous turnaround.

The fact that its stock price, despite crashing back down to earth around a week after hitting its peak, has once again surged over $200 in recent days also suggests that the stock’s wild rollercoaster ride is not quite over just yet. At this point, the frenzy was only beginning—by January 20, GameStop’s price had risen to almost $40 per share—a doubling of its price in only three weeks. And on the morning of the 28th, it skyrocketed to a staggering peak of $483. The group WallStreetBets, which has a thriving membership on the popular social-media discussion forum site Reddit, was especially buoyant about GameStop’s fortunes, which helped push its share price higher during the final quarter of 2020. By the end of the year, the company’s stock was trading at almost $20. This recovery attracted the attention of Wall Street, including the eyes of many sizeable hedge funds.

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Essentially, retail investors have found a way to use their collective buying power to exploit a weakness in short selling, and both make money and a point in the process. This has nearly bankrupted a few hedge funds, to the delight of smaller investors, mostly organised and egged on by the online forum Reddit. From how Animal Crossing taught gamers how to pick stocks to the beach bum who made millions betting on the short squeeze happening to what a short squeeze is, The Ringer has the GameStop stock saga covered from all angles. “The reason why that’s important is if there’s people betting the stock is going to go down, and if they’re wrong and the stock price gets pushed up, then what will happen is eventually they will capitulate and they will give up,” Moallemi said. “And the act of capitulation is basically to buy back their short position, which will even drive the stock higher.”

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No one could have anticipated that a struggling video game retailer would be at the center of a next-level frenzy in the stock market that captivated the world, brought hedge funds to their knees and upended the conventions about small investors. The decision by the popular trading app Robinhood to restrict the purchase of GameStop shares through its platform on the 28th—when the stock price was still considerably elevated—also contributed heavily to the price’s sharp reversal. A brokerage that marketed itself as being accessible to small retail investors and promoting the democratisation of finance and investing was all of a sudden suspending its service to those very investors at the most crucial time. Naturally, this led to widespread accusations that it was protecting the wealthy billionaire hedge-funds managers—the Goliaths—at the expense of the Davids. B Acquired Electronics Boutique Holdings Corp. (“EB Games”), a United States-based video games retailer operating approximately 2,300 stores expanding GameStop’s operations in/into Australia, Canada, Europe, New Zealand and the United States.

The company’s performance declined during the mid-to-late 2010s due to the shift of video game sales to online shopping and failed investments by GameStop in smartphone retail. In 2021, after retail investors on Reddit noticed that the short interest exceeded 100%, the company’s stock price skyrocketed from $17.25 to over US$500 per share. According to the SEC report, this volatility was only in part due to the shorts covering their positions, but mostly thanks to the massive buying power of retail investors. The company received significant media attention during January and February 2021 due to the volatility of its stock price in the GameStop short squeeze.

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And when selling, the investor similarly sells all the constituents at the same time. As such, there has been a growing trend within sections of financial markets through which price sensitivity to individual companies has taken a nosedive—the GameStop incident only further reinforces that insensitivity. The prevailing analysis about GameStop’s impending doom was simply wrong,” one of Reddit’s most influential traders, Keith Gill, more popularly known as Roaring Kitty, declared when he appeared before Congress following the initial turbulence. The fact the GameStop’s share price remains elevated following news that it made structural changes to successfully transition away from a brick-and-mortar business to an online model would suggest his view is far from being extreme.

Australian investors warned to be careful as GameStop share frenzy spreads

Attal was the former chief marketing officer at Chewy, and oversaw its rapid expansion from three people to more than 10,000 employees. Grube was the formerly the chief financial officer at Chewy, among other executive roles in the e-commerce space. Still, the company reported an operating loss of $63 million in the third quarter. GameStop shares plunged nearly 20% the next day, https://www.forexbox.info/backtesting-software-forex-the-best-backtesting/ closing on Dec. 9 at $13.66 a share. A company worth $1.3 billion on the stock market on New Year’s Eve was worth about $21 billion at the end of last week, roughly the same as Kellogg’s, the cereal maker, which, unlike GameStop, is solidly profitable. The humour, irony and self-deprecation of r/Wallstreetbets is the engine that powered the initial purchase of GameStop shares.

The company reported profits of US$9.4 million, US$52.2 million and US$30.6 million for each fiscal year respectively. GameStop is an American brick-and-mortar retailer that specialises in video games, consumer electronics and gaming merchandise. It was widely deemed a company in declining health—indeed, its mere existence as a physical shop was viewed on Wall Street as being decidedly outdated, and its business model was hurtling towards failure. This bearish In intraday trading view was only further reinforced by GameStop’s share price, which had been on a long-term downtrend—from just below $50 at the start of 2014 to a mere $3 about a year ago. As the tug-of-war between the everyday investors and hedge funds heated up and support grew for GameStop on r/wallstreetbets, the stock skyrocketed more than 50% in the trading session on Jan. 22. During after hours and pre-market trading that weekend, the GameStop continued to climb.

But this does look set to change the game of short selling forever, and that will have huge ripple effects. The power of retail traders now seems higher than ever, and social media has been shown to be a remarkably effective method of stock market hype. That history makes the recent frenzy in the shares of GameStop all the more strange. Although the company’s sales are declining and it is losing money, its stock, which closed at $325 Friday, was up over 1,600 percent in January alone, bid higher by a horde of online traders. E Acquired SFMI Micromania (“Micromania”), a France-based video game retailer operating 332 video game stores expanding GameStop’s operations into France. A Acquired a majority interest in Gamesworld Group Limited (“Gamesworld”), an Ireland-based video game retailer operating 10 stores expanding GameStop’s operations into Ireland.

The frenzy for the troubled retailer’s stock has been a head-scratcher for the analysts who try to determine a company’s value. J Acquired Geeknet, Inc. (“ThinkGeek”), a United States-based online and wholesale Pop Culture retailer. G Acquired Simply Mac, Inc. (“Simply Mac”), a United States-based Apple specialty store retailer. But GameStop was the perfect target, and many of these other stocks are not as shorted nor as popular. Hi Shelley, you and more than $6bn of lost hedge fund money are asking the same question. If your bet was wrong and the price actually rises instead of falling, you’d lose money.

More than four million people are in it, usually discussing stocks and shares and where they’re going to invest money. He added that in many ways “there’s really no difference” between what this Reddit army did and what hedge funds or institutional investors do when they see a stock that is mispriced in some way. The U.S. Securities and Exchange Commission on Jan. 29 issued a statement saying it is “closely monitoring and evaluating the extreme price volatility of certain stocks’ trading prices over the past several days.” The Tesla chief executive has some 44 million Twitter followers and was already a popular figure among users of the Reddit forum — especially as Tesla stock soared in recent years despite questions over the company’s actual valuation. A lot of people are crowing that this is giving large hedge funds and traders a taste of their own medicine. When Elon Musk tweeted “Gamestonks” and linked to the r/Wallstreetbets forum, the share price jumped about 150% in after-hours trade (although there are suggestions the timing of the rise was a coincidence).

Left of Citron Research made the announcement in a YouTube video, saying Citron Capital let go of the majority of their bets that GameStop stock would fall and took a “100%” loss in doing so. “So it started out as kind of a little bit of a value investing story,” he added. “But then this sort of technical phenomenon, which is called a short squeeze, that was really sort the dynamite that was thrown on the kindling.” Gill did not immediately respond to ABC News’ request for comment, though he told the Wall Street Journal last week that he “didn’t expect this.” “We are excited to bring our customer-obsessed mindset and technology experience to GameStop and its strategic assets,” Cohen said in a statement at the time.

Cohen is the founder and former chief executive of the e-commerce platform Chewy and one of the largest shareholders in GameStop through the private firm he operates, RC Ventures. In early December, GameStop reported that net sales plummeted in the third quarter of its fiscal year 2020, down more than 30% compared to the same time period in 2019. The retailer attributed this drop in sales to a number of reasons, including an “11% reduction in the store base.” This huge disconnect between GameStop’s stock price and how the company is actually doing has created one of the more bizarre moments in Wall Street’s over 200-year history. This exact scenario also can’t apply to other stocks that don’t have a significant percentage of short sellers, or that aren’t down in the dumps. For example, Reddit could not coordinate the same thing on Apple shares.

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