It’s been another wild week on the internet, with absolutely nobody being able to predict the fact that Gamestop (the owner of EB Games) being in the news around the world.
This is due to the company’s stock price surging, after a bunch of Redditors wanted to prove a point to Wall Street and show that the power of the people is stronger than ever.
I’ll be honest, I didn’t fully understand a lot about the stock market before the last few days, and whilst I could obviously see Gamestop’s stock price surging, and understood that it was due to this corner of the internet (that has now become an extremely large portion of the internet), I didn’t really fully understand it all until I read this tweet.
Thank you to whoever explained this – @reddit is incredible
As explained by the post “You need to understand what a short is. A Short is when you borrow a stock from a broker and sell it immediately at its current price. Then you hope the stock’s price falls such that you can buy the stock back at a lower price and return the shares you borrowed to your broker but keep the difference”
As explained by the post, these hedge funds essentially shorted Gamestop’s stock which means that they were intending for them to go down and claim back the difference. The Reddit army noticed that there were millions of dollars worth of Gamestop stock shorted, so drove the price up, meaning that instead of these hedge funds getting money back from brokers, they’d have to pay the difference instead, which would literally send them bankrupt (to the sum of more than 13.1 billion dollars which is worth more than these hedge funds in their entirety”.
What’s happening now is that stock trading platforms have halted trading on Gamestop, meaning that users can’t buy anymore stock, but they can sell it. They’ve said that this is only temporary, but it still has had a huge impact with stocks falling already. This can only benefit the people at the top of the food chain, and definitely isn’t supposed to be how the stock market is run.
Not only is it going to be interesting to see how this continues to play out, with the internet not turning its sights on company’s such as AMC, Blockbuster and more, it’s very clear that the power of the people can drive the stock market in ways that weren’t intended by those who benefit most.