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Gamestop has Shown the Power of the Average Person Against a Skewed Financial System
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This Gamestop situation is fascinating. Gamestop is a computer-game selling US retailer who have struggled the past year, partly due to pandemic, partly because they’re a legacy business that sells physical games and partly for other reasons.
Gamestop’s share price didn’t really move much for the first 8 months of 2020; it traded between $3–5 per share, but that changed post Sept when it went up to around $14/share by November. This month (Jan 2020) it skyrocketed to an all-time-high of around $340/share.
That’s an 8500% rise. But what gives? How did a struggling computer-game retailer’s stock price explode by 85x?
Enter Reddit. A redditor on r/wallstreetbets noticed a hedge fund had taken a massive short position against Gamestop.
For those unfamiliar, when you ‘short’ a stock you’re betting on the price of it going down. If it goes down you make money, but if the trade goes against you and the price goes up, you lose money, and the money you lose is directly correlated with how high the price goes. Because a stock could very well…
