BY LOGAN SCHLOSSER
STAFF WRITER
As you all may have seen recently. the internet is kinda going a bit off the walls (get it, wall street) recently when it comes to the stock market recently. From what you may have heard, the price of the GameStop stock has increased by an insane amount in terms of cost. It just simply seems that the stock had just increased for no apparent reason at all. So, to help all of the confusion that is surrounding this topic, I will be mashing all of this stock-market-drama into an easy-to-understand one-page summary. With that out of the way, let’s get into some economics!
So for starters, you are probably wondering, “how did the stock increase so fast?” Well, it happened because the Reddit community noticed something that certain investors had been doing. The investors were using a little trick in the stock world called short selling. Short selling is essentially where an investor borrows a stock from somebody, then tries to sell it as fast as possible. If they are able to sell the stock at a higher price, then buy it back when the stock drops, then they buy back the stock and return it to the person who originally owned that stock. Finally, they pocket the profits they were able to make. Anyways, Reddit however, noticed a flaw that Wall Street didn’t seem to notice. Wall Street purchased more shares than the company was actually worth. So, Reddit took it upon themselves to increase the price of the Gamestop stock via just buying a lot of the stock. The main point of them doing this was so the Wall Street investors, banking on the death of a business, would have to purchase back their stocks at an exponentially higher rate. And the plan ended up working insanely well. They were able to raise the market value of Gamestop from two billion, to twenty-four billion in just a matter of days! Plus their shares increased by 1700% in the same amount of time.
To sidetrack a bit, you may have heard the name “Robinhood” thrown around quite a lot. That’s because they are a pretty crucial part of the story here. Now, to quickly explain what Robinhood is. They are a major stock trading company that is known to be very accessible to beginners in the stock market. However, they did an incredibly shady and controversial thing while this was going on. They essentially locked up the buying of the Gamestop stock. Essentially attempting to force people to stop purchasing the Gamestop stock. They rigged the stock market in favor of the major investors.
So this is currently where we are right now in this current situation. Now, I would love to continue to write about the stock market and Gamestop, but that would require a lot more explaining, and making this whole article a lot more confusing. So, I truly hope you did enjoy me talking about something other than games once in a while. The main reason I wrote this article was just to show that the little guys can finally beat the Wall Street investors easily. They can no longer hold us down with unfair market manipulation and attempting to short-sell companies. Anyways, thank you for reading!
-Logan Schlosser
Sources!
Inside WallStreetBets, the Reddit army that’s rocking Wall Street – CNN
Reddit vs. Wall Street, explained | Brut.
Opinion: Why you should never short-sell stocks – MarketWatch
GameStop Stock Soars as Reddit Investors Take On Wall St. – The New York Times
Elizabeth Warren asks Robinhood to explain GameStop trade restrictions