By market open on Wednesday, shares in GameStop had soared 120 per cent, costing established short-sellers (who bet the stock value would fall) millions.
Media outlets were shocked by the news. The Financial Times reported a “day-trader onslaught”, CNBC diagnosed “GameStop Mania” and CNN referred to “the GameStop frenzy”.
Usually such a jump would reflect good news about a company but GameStop, as a business, is largely unchanged
GameStop, and other previously struggling stocks (like those in BlackBerry LTD) have been forced up by coordinated and sustained buying by retail traders, sometimes referred to as armchair, or amateur traders.
Professionals, decrying a collapse of the investing world’s status quo, protest that the retail traders are unfairly (and illegally) manipulating stock prices by conspiring to purchase the same shares, thus driving them up.
A Reddit message board, r/wallstreetbets, stands at the centre of the chaos. The controversial forum championed the purchasing of GameStop stocks, and members continue to pitch the next mass-purchase of shares.
Its members, who affectionately refer to each other with a variety of expletives, mostly trade using Robinhood, an application that allows traders to make investments from the comfort of their home.
For WallStreetBets traders, the principles that underpin conventional trading to not apply. Due diligence and risk management are abandoned in favour of “YOLOs”, the practice of placing most, if not all, of ones’ funds into a single position, and either getting rich, or losing everything.
The subreddit currently has 4.6 million members, many of whom continue to advocate for GameStop, sure that it’s only going to keep rising, “to the moon”.
As things stand, GameStop shares are more than 8000 per cent up in January 2021 than they were in January 2020.
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