The video game retailer GameStop has, surprisingly to many, become one of the most popular stocks that were being traded. However, now it is in the middle of a David-and-Goliath battle between a group of small investors and Wall Street. This battle also represents a fundamental shift in the investing world.
Last April, when the company announced mass store closures, GameStop’s shares were valued at around $3.25 each. On Tuesday this week, those same shares were valued by some at $148. Some have attributed this price rise to a number of small investors hoping to ruin Wall Street bets that the price would crash. Currently, professional financiers are considerably out of pocket.
GameStop has been the most actively traded stock by customers of Fidelity Investments in recent trading sessions. Buy orders were outnumbering sell orders by more than four to one at points. This brought about volatility that prompted the New York stock exchange to halt trading nine times.
On Monday, one Reddit user wrote: “We broke it. We broke GME [GameStop’s stock market ticker] at open”. Ihor Dusaniwsky who is the managing director at the data analytics company S3 Partners, has described the situation “unique”. He has also said that established investors were still going to betting that the company’s sky-high share price would collapse. He has said: “Much like the revolutionary war, the first line of troops goes down in a rain of musket fire but is replaced by the troops next in line”.
Melvin Capital Management is a hedge fund that has lost 30% of $12.5bn on a series of short positions, including on GameStop. Edward Moya who is a market analyst has said: “As someone who started trading stocks in the late 90s in college, I would always remember watching when the small retail trading groups would get crushed by hedge funds and savvy short-sellers. What happened with GameStop’s stock is a reminder of how times are changing”.
Trading 212 has this morning told its customers that it has placed GameStop into reduce only mode, which means that new positions can not be brought of the stock.
Current Affairs Correspondent | My name is Oliver Down I am 22, and a staunch brexiteer. I am a Bristolian lad who studied politics in Leicester. I believe in free speech and accurate journalism and I won’t be afraid to give you “the other side” of the story!
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