GameStop’s Sudden Surge in Stock Prices
In an increasingly online world, the role of GameStop was steadily diminishing. People do not feel the need to visit physical stores to purchase video games, instead utilizing online platforms to buy them. Furthermore, with the on-going pandemic, people have avoided going out as much as they once did. However, with the intervention of a thread on a prolific social media platform called Reddit, the tables seem to have turned more rapidly for GameStop than any could have imagined. A subreddit, r/wallStreetBets, was what changed matters for GameStop. Perusers of this subreddit often attempted to beat out short-sellers by attempting to predict which stocks the short-sellers were after, since they did not like how short-sellers exploited the market and financial system to make profit. Short-sellers are investors who essentially pay to borrow stock for a predetermined period and sell it back to the companies later hoping to make a margin profit. Although, if the price of the stock increases when it is time to sell back the stock, short-sellers lose money. Similarly, there are hedge funds, which are groups of wealthy investors that use risky tactics, such as investing with borrowed money. Short-sellers and hedge funds benefit from the value of the asset falling, rather than rising, meaning that they try to look for companies that are declining to make a profit. In less words, these people make a gamble on whether a company’s stocks will crash or not.
