Whats the deal with shares for Gamestop (GME) soaring? And why is the financial press up in arms about Reddit day traders? Gamestop trading seems to be the issue. The Texas based company is a destination for the sale of pre-owned and new video games with 5,509 retail stores across the United States, Canada, Australia, New Zealand, United Kingdom, Ireland and German as of February 1, 2020.
The tweet below from Ana Kasparian provides a clue.
The last many months have seen a swell of a new kind of trader entering the retail market made up of non professional day traders. Many have taken the view that the pandemic means more time at home for families and subsequently more time gaming. Retail bulls drove up the price of GME to over $300 at the time of writing, despite NASDAQ halting trading multiple times during the week.
The core of the issue Wall Street took on stemmed from members of Reddit threads such as “wallstreetbets”, many of whom were working hard to push up the share price. This in turn inflicted heavy losses on short-sellers such as Citron and Melvin Capital to name a few. Wall street expectations were close to a share price of $15. Market experts estimate the combined losses to be in the billions. The rally for GME was also exacerbated by Elon musk’s tweet:
The trading frenzy was followed by a number of copycat attempts for other listed companies but the market’s attention was clearly focused on Gamestop. Most individuals on social media saw this as small win for the retail trader, and felt vindicated by billionaire, Chamath Palihapithiya going on record with the financial press on an interview with CNBC Halt-time host, Scott Wapner saying that he felt the short selling of GME felt wrong in the first place and that he considered the games retailer to be “a reasonable business”. The cherry on top of the pie, Chamath is to donate all his GME trading profits to the barstool fund (aiming to help small business struggling in the face of the Covid-19 Pandemic). Reddit crowd 1. WallStreet 0.