GameStop over the last year has had issues keeping their business afloat with the recent worldwide economic situation, things got a lot harder for the once giant games retailer, as their stock price plummeted to almost $0.30 as wall street wolves attempted to partake in a practice known as short squeezing.
For this, the shareholder short sells shares. Short selling is a fairly simple concept—an investor borrows a stock, sells the stock, and then buys the stock back to return it to the lender.
Short sellers are betting that the stock they sell will drop in price. If the stock does drop after selling, the short seller buys it back at a lower price and returns it to the lender. The difference between the sell price and the buy price is the profit.
Reddit group r/wallstreetbetz, a group of average Joes that have no experience in the stock market compared to the hedge fund executives, saw this move coming and bought almost all the GameStop shares that were short sold in protest to how wall street operate.
With such a large number of new investors, the stock price skyrocketed, making people who have never invested in the stock market millionaires overnight and at present costing seasoned investors $20 billion for trying to manipulate the market.
The stock blew up and went 1,200 percent over the price the stock sold at.
But now stock market operators are restricting the sale of the stock in an attempt to quell the squeeze, in particular, the well-known Robinhood app has ceased the sale of shares.
Social media has not taken this move lightly, with government officials like Alexandra Ocasio-Cortez calling this move by Robinhood “unacceptable.”
This is unacceptable.
— Alexandria Ocasio-Cortez (@AOC) January 28, 2021
We now need to know more about @RobinhoodApp’s decision to block retail investors from purchasing stock while hedge funds are freely able to trade the stock as they see fit.
As a member of the Financial Services Cmte, I’d support a hearing if necessary. https://t.co/4Qyrolgzyt
Other powerful one-percenters like Elon Musk tweeting to that effect, other celebrities have backed the Reddit group on social media while also disapproving of the operator’s actions. Understandable as if this move was made by the hedge-fund executives then no restrictions would have been enforced.
The Reddit group has responded with the statement “hold the line,” urging members not to sell as the executives try desperately to drive the price down and recoup their losses by getting operators like Robinhood to restrict the sale of these stocks.
It would seem that Robinhood has switched sides to now steal from the poor to give to the rich. No doubt r/wallstreetbetz will be keeping an eye on the market to see what other stocks they can snap up in what seems to be a war of rich vs. poor.
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