It’s a real-life David vs. Goliath tale: small-time stock investors seem to have taken down massive hedge funds! And it’s all over a video game company? What the hell is going on with Gamestop? Here’s what.
Gamestop, a video game retailer, has been losing money for years as gaming has moved online. Massive hedge funds, like Melvin Capital, decided to “short” GameStop’s stock (GME), which means they made a big bet that the stock would lose value. That was a mistake.
Wall Street Bets (WSB), a group of mostly young, tech-savvy, small-time investors on the website Reddit.com, noticed the “short” on GME, and decided to “squeeze” – throwing the entire stock market into disarray.
Thousands of WSB investors bought shares of GME, raising the stock’s price substantially. As a result, the hedge funds lost literally BILLIONS of dollars!
They’re complaining, but high-profile figures like Alexandria Ocasio-Cortez and Elon Musk argue that hedge funds do the same thing every day to make billions while the rest of us are struggling.
The debacle has made it clear that regular people have more power than we think when we work together. More importantly, it shows that the stock market is mostly an illusion – GME’s increase had nothing to do with GameStop’s actual performance as a company.
Because of all the hubbub, GME’s stock has been extremely volatile lately. Invest at your own risk!