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January 26, 2021I can’t say for sure what is going on here, but it appears it’s a battle between Reddit & Gamers to drive the Gamestop stock up.
GameStop is an American video game, consumer electronics, and gaming merchandise retailer. The company is headquartered in Grapevine, Texas, United States, a suburb of Dallas, and operates 5,509 retail stores throughout the United States, Canada, Australia, New Zealand, and Europe as of February 1, 2020.
Who knew the first big 2021 stock market story would be … GameStop? But here we are.
There’s been a boom in day trading and individual investing over the past several months — activity that’s often taking place or being discussed on platforms such as Reddit and Robinhood instead of in more traditional arenas. And one big question amid the frenzy has been how much the little guys really matter. Sure, small-time investors trade a lot, sometimes to the annoyance of more traditional institutions, but are they really consequential?
When it comes to the GameStop saga, at least, the answer is yes. An army of traders on the Reddit forum r/WallStreetBets helped drive a meteoric rise in GameStop’s stock price in recent days, forcing it to halt trading multiple times and causing a major headache for the short sellers betting against it and banking on the stock falling.
Famed investor and CNBC personality Jim Cramer called the GameStop drama the “squeeze of a lifetime.” Bloomberg opinion columnist Matt Levine posited that one possible explanation for what happened could be “utter nihilism” on the part of the Reddit crowd, a story “perhaps best told with a series of rocket emojis.” Or maybe one of the WallStreetBets moderators put it best to Wired: “It was a meme stock that really blew up.”
There’s been a lot of hand-wringing about the day-trading trend and this new crop of investors playing the markets, many of whom are treating stocks more like a spin at the roulette wheel than a long-term strategy to build wealth. It’s not clear how many of them are looking at the underlying fundamentals of companies, or whether they’re just “YOLO-ing” themselves across the market.
On GameStop, the answer is probably a mix. There’s a reasonable business case to make for (some of) the game retailer’s valuation; there’s also a case that this whole thing has just been quite fun for everyone — the possible trolls of Reddit, market watchers, commentators, and certainly GameStop — except for the short sellers, who have been in for a pretty miserable ride.
“It’s dramatic, and you don’t see this magnitude very often,” said Nick Colas, the co-founder of DataTrek Research. “But when it happens, it’s spectacular.”
