The chatter about video game retailer GameStop (GME) and traders on Reddit has been bubbling over the past week and finally spilled over from the finance world to the mainstream. Here’s what’s happening:
What or who is ‘WallStreetBets’?
WallStreetBets is actually “r/wallstreetbets” and it’s a forum or “subreddit” on the popular website Reddit, which is a social platform and discussion group that also rates web content.
Essentially, it’s a group of people who enjoy talking about investing and often, speculative investing. Given that it’s on Reddit, it is accompanied by traditional Reddit-house style, which often includes profanity, irony, and a tremendous dose of memes.
Why GameStop?
One Wall Street Bets user made the case for the stock as a value investment, which means that this user viewed the stock as being more valuable than the stock price indicated. The case for buying a stock, the user wrote, had nothing to do with a turnaround in the company’s business, which has suffered during the pandemic.
So what happened to GameStop?
Many people bought into this logic. At the same time, a few hedge funds — professional investors with billions of dollars under management — were selling the stock short, betting it would go down.
So while short sellers were betting it would go down, the Wall Street Bets community started buying GameStop shares, taking the other side of the bet. In this tug of war, the stock price started to rise — and quickly. At least in this instance, the Reddit community proved to be more powerful than the short seller establishment.
So, some people finally figured out a way to use soicial media to create artificial fluctuations... on a massive scale haha, so, if you had $100 of GameStop stock last summer, it's now worth ~$ 6000.
01-27-21, 05:06 PM
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