Has everyone been following the storyline with our stock market and GameStop over these last 2-3 weeks? At this point, it has been all over the news, so I'm sure you've heard about it. Not to mention the volatility of the stock has had an impact on our stock market across the board...
Anyways, if you don't know what I'm talking about, here's the rundown. GameStop was around like $15 per share just three weeks ago. Randomly, a Redditor that is a member of the Wall Street Bets subreddit noticed that GameStop was one of the most shorted stocks in the market, with it being shorted at an insane percentage. If you didn't know, shorting a stock is basically when you bet that the price of that stock will drop. It gets far more complicated with that, but that's the gist of it. This Redditor posted to the subreddit telling everyone to buy the stock because it was being shorted so much. All of a sudden, all of these members of this subreddit banded together and started buying this stock left and right. It was seen as a way of "sticking it to Wall Street." All of this buying of the stock caused the stock price to go up, which left all of these large hedge funds is a very bad position because they had shorted the stock. Rather than accepting the defeat on the short, they kept buying the stock back and continuing their short, hoping that the stock would soon fall once more. But at the same time, these hedge funds matching the new stock price caused the stock price to rise even more. They call this a "short squeeze" apparently.
All of this going on made the stock price go from that measly $15 per share to nearly $500 per share in like two weeks, with the stock price literally doubling in an hour at one point. The price of the stock has jumped all over the place due to different things going on, but it's still over $300 right now. It is crazy how volatile it has been though. In a couple of hours, the stock literally dropped from $480 per share to $120 per share. On this day, tons of stock brokerage firms put a block on buying the stock. They made it where you could only sell what you were already holding. Companies did this with the claim that they were protecting the investors, claiming that the volatility of the stock was too dangerous for us. This put all of us holding it in a very bad position. Typically, when a stock dips, that's when you go and buy some more. And when people are doing that in large masses, you'd think that would mean that the stock price would at least rebound a little bit. Unfortunately, blocking people from buying it meant that when it dipped, it dipped. It dipped bad. And didn't stop. Imagine all of those people that bought into GameStop in the $400 range, and then watched it drop as much as it did? Obviously all of this is very risking investing to begin with, and I'd say we should just call it gambling. But these companies like Robinhood certainly didn't do us any favors. 😛
Robinhood immediately faced a ton of backlash, and I wonder if they'll recover from this ordeal. I mean, the app is literally called "robinhood." What is that character known for? He takes money from the rich and gives it to the poor. Robinhood's mission has always been to bring stock trading to the masses. The regular everyday people like you and me. When it's all said and done, I think it became clear that they don't care about the little people. There's a lot of talk that a lot of these hedge funds put new shorts in right before all of these brokerage firms implemented these blocks. Lots of pissed off people are talking about lawsuits. The very next day, Robinhood permitted buying once more, but it was limited to buying one share. They're basically only allowing you to hold one share of the stock in your account right now. It's crazy. I read that there are legitimate reasons for these firms making these blocks in regards to SEC regulations and dealing with clearinghouses, but all of us stockholders just feel like the little guy was screwed over once again.
It will be very interesting to see what happens with GameStop this week.
Anyways, if you don't know what I'm talking about, here's the rundown. GameStop was around like $15 per share just three weeks ago. Randomly, a Redditor that is a member of the Wall Street Bets subreddit noticed that GameStop was one of the most shorted stocks in the market, with it being shorted at an insane percentage. If you didn't know, shorting a stock is basically when you bet that the price of that stock will drop. It gets far more complicated with that, but that's the gist of it. This Redditor posted to the subreddit telling everyone to buy the stock because it was being shorted so much. All of a sudden, all of these members of this subreddit banded together and started buying this stock left and right. It was seen as a way of "sticking it to Wall Street." All of this buying of the stock caused the stock price to go up, which left all of these large hedge funds is a very bad position because they had shorted the stock. Rather than accepting the defeat on the short, they kept buying the stock back and continuing their short, hoping that the stock would soon fall once more. But at the same time, these hedge funds matching the new stock price caused the stock price to rise even more. They call this a "short squeeze" apparently.
All of this going on made the stock price go from that measly $15 per share to nearly $500 per share in like two weeks, with the stock price literally doubling in an hour at one point. The price of the stock has jumped all over the place due to different things going on, but it's still over $300 right now. It is crazy how volatile it has been though. In a couple of hours, the stock literally dropped from $480 per share to $120 per share. On this day, tons of stock brokerage firms put a block on buying the stock. They made it where you could only sell what you were already holding. Companies did this with the claim that they were protecting the investors, claiming that the volatility of the stock was too dangerous for us. This put all of us holding it in a very bad position. Typically, when a stock dips, that's when you go and buy some more. And when people are doing that in large masses, you'd think that would mean that the stock price would at least rebound a little bit. Unfortunately, blocking people from buying it meant that when it dipped, it dipped. It dipped bad. And didn't stop. Imagine all of those people that bought into GameStop in the $400 range, and then watched it drop as much as it did? Obviously all of this is very risking investing to begin with, and I'd say we should just call it gambling. But these companies like Robinhood certainly didn't do us any favors. 😛
Robinhood immediately faced a ton of backlash, and I wonder if they'll recover from this ordeal. I mean, the app is literally called "robinhood." What is that character known for? He takes money from the rich and gives it to the poor. Robinhood's mission has always been to bring stock trading to the masses. The regular everyday people like you and me. When it's all said and done, I think it became clear that they don't care about the little people. There's a lot of talk that a lot of these hedge funds put new shorts in right before all of these brokerage firms implemented these blocks. Lots of pissed off people are talking about lawsuits. The very next day, Robinhood permitted buying once more, but it was limited to buying one share. They're basically only allowing you to hold one share of the stock in your account right now. It's crazy. I read that there are legitimate reasons for these firms making these blocks in regards to SEC regulations and dealing with clearinghouses, but all of us stockholders just feel like the little guy was screwed over once again.
It will be very interesting to see what happens with GameStop this week.
