Crazy! GameStop Stock Soars 2,500%, Let's Check The Cause

GameStop (GME) shares rose at the opening of trading day, Wednesday (27/1/2021). The share price of the giant gaming retailer listed on the New York Stock Exchange (NYSE) recorded a figure of USD 347.51 per share.

Trading data noted that on Thursday (28/1/2021), Gamestop’s shares experienced a fantastic increase, reaching the company’s highest level of USD 483 per share. This had caused the New York Stock Exchange to temporarily close GameStop stock trading more than 12 times.

Supported by Positive Sentiment

Despite experiencing a fantastic increase, there were fluctuations in the movement of GameStop shares. The dominance of GameStop’s shares on market movements was also supported by positive sentiments that came from several figures.

Gamestop’s stock jumped even more after Elon Musk tweeted the words “Gamestonk!!” on his personal Twitter account on Tuesday (26/1/2021). While including a link to the Reddit sub-forum, the tweet hints that Elon Musk also bought a fantastic amount of GameStop stock.

Shortly after the tweet went viral, GameStop’s stock rose drastically to 40% after working hours. The trend of the GameStop strengthening rate continued on Wednesday (27/1/2021) which closed at USD 347.51 per share, although previously it had weakened.

In addition to Elon Musk’s tweet, the wholesale action taken by investors was due to positive sentiment. Another positive issue also came from a Social Capital Investor, named Chamath Palihapitiya. In his personal Twitter account, Palihapitiya openly said that he also bought a large amount of GameStop shares.

Starting from Reddit

The increase in GameStop’s stock price which has been in the spotlight on the United States (US) stock exchange recently, is not without reason. According to information, this spike originated from the Reddit forum, WallStreetBets. Here is a group of investors who are members of the Reddit forum, WallStreetBets intending to make the bookies at GameStop lose.

It is known that these investors increased the price of the company’s shares, which were financially gasping for air, by taking the option to buy a large number of shares. In fact, these bookies hope to make a profit by borrowing shares to then resell them at market prices.

So they can get money from the price difference. Simply put, the bookmaker will play with market sentiment in order to suppress the value of the sheet so that it continues to decline. When the price has reached the target, the dealer will borrow shares to sell to investors at the market price.

Hopefully, when it’s time to return, the retailer’s share value for this video game product is already at its lowest level. If this is the case, the dealer will buy back shares from investors at a low price and then return them to the shareholders.

It is from the difference in price that the city gets cuan. Due to this action, GameStop’s shares have now shot up almost 2,500% or around US$ 460. After previously this company’s stock had reached its lowest point where the stock value was below US$ 20 at the end of the year.

Restrict Trading, Robinhood Criticized

Robinhood’s move to limit GameStop stock trading on Thursday (28/1/2021) has been criticized by various parties. This American online broker has drawn criticism for being accused of protecting the interests of bookmakers and Wall Street, which is being completely out-done by investors.

Robinhood is considered to protect the city’s losses by eliminating the opportunity for investors who want to buy GameStop shares through the Robinhood Apps. As a result, the long rally that occurred during the week had stopped and made GameStop’s stock price depressed several levels.

One of the criticisms came from MPs in Congress, including Alexandria Ocasio-Cortez and Ted Cruz. They criticized Robinhood’s policy of restricting retail trade to just an interest. Other criticism also came from retail investors and celebrities. The online discussion forum was angered by the act of the free platform, which was considered to be at the expense of smaller investors.

“Robin Hood: the parable of stealing from the rich to give to the poor. Robinhood: an app about protecting the rich from being blackmailed by the poor,” wrote Jake Chervinsky, attorney for fintech firm Compound on Twitter.

Unfortunately, as if it had no shame, Robinhood did not budge and instead denied the accusation. Robinhood Chief Executive Vlad Tenev, argued that what his company did was not at the direction of market makers. This decision is made only to protect the company and clients.

“We are in no way doing this at the direction of any market maker or hedge fund or anyone we route or any other market participant,” he explained.

Due to this mass wholesale action, the Hedge Fund or big cities such as Melvin Capital and Citron Research suffered losses totaling US$ 19 billion or equivalent to Rp 267.9 trillion (exchange rate of Rp. 14,100). However, this loss figure is only an estimate because it has only been calculated based on unrealized data.

Bandar Loss, Party Reddit Community

In contrast to investors who are enjoying their winnings, the bookies are actually confused because they experience huge losses. Like Citron Research, for example, one of these Hedge Fund firms had to lose almost 100%.

Meanwhile, on the Reddit forum, investors publicly celebrated his success in increasing the value of GameStop shares by up to 2,500%. They reminded each other to keep the value of the shares by not selling them. With this victory, the investors, mostly young people, managed to pay off their college tuition arrears.

Chamath Palihapitiya, the investor who also bought the shares, openly admitted that there was nothing wrong with the GameStop and WallStreetBets phenomena. According to him, the phenomenon that forced the United States government to intervene is a form of democratization of stock trading.

“Instead of thinking about what they should buy through a luxurious dinner at Hampton, these young retail investors dare to make decisions in an open forum,” said Palihapitiya, responding to the issue of GameStop shares.

A little information, there are as many as 3.8 million investors who are registered as members of the WallStreetBets community. However, it is not known exactly how many investors are involved in the scheme.

Analysts warned that the step taken by investors by buying up GameStop shares was a big mistake. The reason is that the aggressive behavior, impatience and wanting to get investment profits in a fast way by short sellers can trigger big problems such as losses.

Moreover, fundamentally GameStop is still in financial difficulties. And when examined more deeply, it’s difficult for GameStop to maintain that value for a long time.

Stay tuned for updated fact information about games, gadgets, the digital world, and anime only at Kabar Games. So you don’t miss the news, you can follow the news Instagram and Facebook accounts. You can also join us on the Kabar Games Discord Channel. Don’t forget to leave your comments!

Share :