What Is Going On With GameStop?
Let’s get right to it…what is going on with GameStop? Unless you’re living under a rock, you’ve probably heard about the most recent stock market news surrounding GameStop. You might even know that it has to do with short squeezes or Reddit.
The main gist is that large hedge funds and other big dollar investors were bearish on GameStop (NYSE:GME), because they thought it was going out of business. So to make money off of that, they bet against or shorted GameStop. But now in comes the “new” investment crowd to flip the script. Millions of new young investors that have Robinhood or other brokerage accounts decided to buy GameStop, creating a tidal wave that drove the stock price through the roof!
What Is Going On With GameStop? 3 Things to Know
Investment U has been covering this topic in great detail and there are many exciting takeaways for investors to consider. Here are three.
Short Squeezes Are Not New
We must remember that this isn’t the first time that the market has seen a short squeeze. In an article published last week detailing short squeezes, Investment U writer Amber Deter noted “Back in 2008, in the middle of the financial crisis, Volkswagen AG’s stock was short squeezed. After an attempted takeover by Porsche, the company’s stock increased from €210.85 to €1,000.”
Brokerages Limited Trading Due to Volatility and Underlying Financial Requirements
Many investors became enraged when Robinhood blocked GameStop trading. IU Writer Matthew Makowski also wrote an article breaking down the events that transpired. “Robinhood wasn’t the only brokerage to put a stop to trading GameStop. TD Ameritrade said it was restricting trading in GameStop. Meanwhile, Charles Schwab announced that it was tightening margin requirements in some stocks, including GameStop. And before trading closed on Thursday, Interactive Brokers announced it had put GameStop and AMC option trading (among others) into liquidation. This meant that some investors could no longer create new positions”
Is This a David vs Goliath Story?
Our Senior Macroeconomic Analyst, Matt Benjamin also chimed in: “Well, it’s about much more than this one small and somewhat insignificant stock. It’s about the little guys – retail investors trading on Robinhood and other stock trading apps – trying to outsmart the big guys – the hedge funds and other institutional investors. Rarely can small-time retail investors outduel the big institutions. They just don’t have the firepower in terms of capital, technology, and other resources. This time, however, the little guys seem to have won – at least for a brief moment.”
In addition to understanding what is going on with GameStop, Trading Expert Bryan Bottarelli sees a much bigger trend at play here. Bryan writes “GameStop just changed the game forever. Individual investors – like you – have never had as much power and influence over Wall Street as they do now… and the implications are enormous.”
There is no doubt that things are moving faster than ever. Drop whatever you’re doing… and watch Bryan’s newest video with all of the important details.
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About Ben Broadwater
Ben Broadwater is the Director of Investment U. He has more than 15 years of content creation experience. He has worked and written for numerous companies in the financial publishing space, including Charles Street Research, The Oxford Club and now Investment U. When Ben isn’t busy running Investment U, you can usually find him with a pair of drumsticks or a guitar in his hand.