Gamestop stock has had quite a roller coaster of a week. Initially deemed a bad investment, the stock that used to sit at $20 a share has skyrocketed to $146 in just over a week.
Reddit and Wall Street Clash Over Rising GameStop Stock
Update 1/27/2021: Gamestop stock has continued to rise to $356 since originally writing this article. Reddit continues to push this stock higher and higher.
You might be thinking that Gamestop really turned themselves around. However, it’s not because Gamestop did anything at all. The subreddit r/WallStreetBets is a group of over 2 million users looking to bleed short-selling dry.
For those unfamiliar with short-selling, here is the definition from Investopedia.
“In short selling, a position is opened by borrowing shares of a stock or other asset that the investor believes will decrease in value by a set future date—the expiration date. The investor then sells these borrowed shares to buyers willing to pay the market price. Before the borrowed shares must be returned, the trader is betting that the price will continue to decline and they can purchase them at a lower cost.”
It’s a pretty common move in the market, and it’s something r/WallStreetBets is trying to change. When a stock is deemed perfect for short selling, this subreddit comes in and buys shares to take a low-priced stock and push the price up, the exact opposite of what the investors wanted.
Gamestop stock up 125% thanks to r/wallstreetbets
— Daniel Ahmad (@ZhugeEX) January 25, 2021
It’s a fascinating look at how the market moves. This is what is currently happening with Gamestop. Users are pushing large quantities of shares, causing the market price to skyrocket and then cashing out for a nice payday.
While it’s not always about making big moves, the subreddit enjoys making a meme out of it. Gamestop was looked at as a meme stock, one that they could laugh about and just play around with, but they took it to a whole other level.
Keep your eyes on the Gamestop stock over the next few days because it’s going to be a wild ride.
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