So the last time you talked about GameStop, it was probably 2009. But now it’s on every headline. Why? Some shenanigans went down. Now “Eat the Rich” is trending, a lot of rich people are mad and just as many average people are confused.
STOCKS, not socks.
The first thing we need to know: Stocks are fractionalized ownership of companies. When a stock goes public, anyone from the general population can buy a piece of the company. The stock market index is just a synthetic measure of how the market is doing.
Wall Street hedge funds (a fancy word for a Wall Street operation that invests money) were betting that GameStop stock would go down. If that happened, they would make money – and a lot of it. Millions of retail investors (average Joe’s) mainly driven by a Reddit stock trading forum (r/wallstreetbets) thought that GameStop Stock would go up and started buying stock.
Reddit and Twitter users caught wind and started buying stocks to ride the jump as well. This week, the price of the stock went so high that at least one of the hedge funds betting against GameStop lost BILLIONS of dollars.
The price was continuing to rise today when Robinhood, an investment trading and brokerage app that many were using to buy this stock, stopped allowing people to buy any GameStop stock. A hedgefund handles 60% of Robinhood’s accounts, and they make money if those stock prices stay low. That’s “shorting a stock.”
The price of the stock then crashed from $468 per share to $125 per share. The stock is now up a bit trading at roughly $310 per share (and counting).
Robinhood still is not allowing people to buy it. Many other brokerage firms that provide service to retail investors are also not allowing Average Joe’s to buy the stock – including TD Ameritrade and Charles Schwab.
People are decrying that this is illegal market manipulation. Hey, what about the little guys?
People have dubbed GameStop as a “meme stock,” meaning the stock is being driven by popularity within the culture rather than the company’s financial standing. However, GameStop isn’t the only meme stock being targeted. Robinhood and other investment apps are not allowing individual/retail investors to buy AMC ($AMC), Blackberry ($BB), Naked ($NAKD) Dogecoin ($DOGE) and Nokia ($NOK).
But Robinhood is nipping that in the bud, too. Before the big guys lose any more change.
Democratic Congresswoman Alexandria Ocasio-Cortez tweeted that Robinhood’s actions are unacceptable.
What’s interesting is that even conservative commentator Ben Shapiro and Republican Sen. Ted Cruz agreed.
Politicians and ordinary people on all sides of the political spectrum notice that something isn’t right here. Average entrepreneurial Americans who wanted to make some money in the stock market are being manipulated by the big institutions. Grab your popcorn and enjoy the show!
Scott Hantler, David Grasso, Sam Bloomquist and Raivyn Sievers contributed to this article.
*Jan. 29 at 9 a.m. – We updated the GameStop share price from $230 to $310.