What’s the Deal With GameStop’s Recent Stock Surge?

Over the past week, GameStop (GME) has seen a significant stock price increase of over 500% and currently sits at a price of around $300. Why? Let’s talk about it.

The company hasn’t been doing well at all. In fact, they’re set to close 1,000 stores by the end of March, adding onto their previous total of over 780 stores closed within the last two years. Many have speculated that the video game giant will go out of business within the next four years. 

This brings us to our question: why is GME boasting a stock price nearly 3x that of Apple? The answer may surprise you. 

Going by the name “WallStreetBets,” an amateur investment collective made up of millions of teenagers and beginner investors has taken it upon themselves to combat all the hedge funds who’re shorting GameStop shares. 

Multiple large funds had previously been betting against GME through the process of “shorting,” in which one makes a future sale on a stock that they think will decrease in price. GME shorters had been investing in many deals that bet against the company and we’re looking for a massive payout. If GME goes down, the firms make a lot of money. If they go up, they lose even more. 

That’s where the David of the story comes in. Battling the Goliath funds, amateurs across the world banded together. They began pumping GME with all the money they had, losing the funds over $5B and causing significant alterations in GME’s trends. 

WallStreetBets is made up of beginners across the world, many of them being teenagers. Mainly concentrated on a subreddit and a Discord, they’ve had a surprisingly large impact on the market.

As the movement grew and prices began to rise exponentially, so did the recognition. Recently, Elon Musk supported the cause via his Twitter page, and the stock started to surge even more. Thus, today’s volume nearly reached 92M shares, leading to the company’s market cap of $24B. 

As teenagers worldwide saw their early investments double, the stock world was stunned in utter disbelief. Was this “pump and dump” strategy legal? Who knows. Is GME going to stay at nearly $350? Probably not. 

What’s more impressive is the impact that a subreddit could have on such a sophisticated market. Their plan started small but eventually snowballed into a nationally covered movement. Who would’ve thought that Wall Street’s most heated battle would be with Reddit?

What’s causing controversy may not necessarily be the actions of WallStreetBets and the fact that they lost significant funds billions of dollars, but the way that their community has been retaliated against. Recently, the Discord server of WallStreetBets has been taken down, and some people aren’t happy. Ana Kasparian writes the following:

“So, market manipulation by federal reserve pumping $ into failing banks & corporations is okay. But Reddit users rallying GameStop is wrong and must be regulated? The entire stock market is disconnected from reality. Funny how quickly the financial press cries for hedge funds.”What do you think about the situation? Feel free to send us a dm on our Instagram page, @Genfluencer.