facebookWhat led to the share price of U.S. videogame retailer GameStop skyrocketing by 144%? - Seedly


28 Jan 2021



What led to the share price of U.S. videogame retailer GameStop skyrocketing by 144%?

What happened in the US gaming industry that caused this sudden spike in GameStop share price?

Discussion (14)

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I think there are a range of reasons, but highlighting / bold the ones that I think are more impactful

A) when the hedge funds shorted the stock down from 40+ to 3+, some of these Wsbers were genuinely concerned that these short sellers could force Gamestop out of business - to them Gamestop is childhood and they want to protect it (or maybe its also they couldn't bear the thought of all the gamestop employees being retrenched if the company is indeed forced to break down under the short selling)

B) they have been through the 2008 financial crisis and strongly believe that these hedge funds caused it and lead to the tough times they had to grow up in. This strong resentment and hate is pretty much still a strong driver for them to want the short sellers to go down. Elon Musk jumped in, as did Chamath.

C) some of them did do due diligence and found value in the story, and was vested already back in 2019. Michael Burry and Cohen bought in. But this was still back in 2020 for the value story when gme was like below 100.

D) the big short squeeze just made the impact very huge. Of course its a significant reason.

E) you have people jump on the bandwagon, FOMO or not. Frankly I think there are bigger players in this category with way more buying power than wsb.

If you think of wsb as the bad guys, did you listen to their side of wanting to protect gamestop from shutting down? Some of them are pretty rational, they do take some profits, but are trying to hold the line so that some of those on wsb could make money off this and use it to improve their own lives (paying off those debt / finally being able to own a home / sending family for the medical treatment that they can now afford?)

There's two sides to the story. Don't just listen to the newspapers / news sites on why wsb is so "evil" and gang up on these short sellers. These short sellers were also too greedy for their own good in the first place. They could have cut their losses and closed out earlier at 100+, 130+, 200+...no one is putting a gun at their heads to not close out the positions and cut losses early. Who is to blame?

And frankly, just reading those posts, I think it's these other players outside of wsb / funds that are helping to push the prices way up. I don't see the folks on wsb having that much money and power to keep forcing the price to go up - they only just need to hold the line and not sell anything. Even the short squeeze is probably a bigger reason than the effort of wsb itself to drive the prices up.

if you look at the population for wsb, frankly they probably make as much as they lose on average, majority really have no background to financial analysis. their result is amplified because they were trading options on Robin Hood. Quite majority are either earning low / minimum wages, or were unemployed, whether retrenched in 2020 or not. I think them describing themselves as "retards" is really appropriate. Some of them are literally just putting less than few hundred on options or whatever they could afford, including this month's rent... Most of them have literally nothing to lose... You don't need to give them too much credit for controlling the market

But yeah there's no fundamentals. Its really more of a war of values (with money to be made in between).
Some people just want to see these short sellers pay for creating all the "shit" in the real world.
Bear their motto in mind - "we can remain retarded longer than they can remain solvent".

I think many are missing the point here. For decades, retail investors have been under the mercy of institutional players with them having unfair advantages over retail investors. With the American millennials being much more educated and analytical, they were able to identify the short interest ratio and the short squeeze scenario and beat the institutional in their own games.

With social media highly accessible, low to zero commission in equities , options and other financial instruments, retail investors able to deliver much higher returns compared to the hedge funds or traditional fund managers.

Some may prefer to put your trust in the "professional fund managers" who more than 90% cannot even beat S&P 500 returns. Maybe you are risk adverse , thinking of handing your money to some AI or robotics platforms. It is your money and your own responsibility to decide what is best for you. Investing is not risk by itself, it is the lack of financial knowledge and reluctancy to learn from mistakes.

For those who want control in their own life and destiny, you should ask yourself "Are you ready for the "GAME" or you "STOP" learning?

GameStop is rallying largely because an army of retail investors on Reddit have been leading the charge to push up its stock price and beat back professional short sellers.

If you follow WallStreetBets on Reddit, there's an element of retaliation against hedge funds like Melvin Capital and Citron Research too.

These funds have been betting on GME stock price to fall so the more the stock spikes up, the heavier their losses.

There are no fundamentals at play here. At this point in time, the stock price is riding almost on sentiment alone.

You can actually watch this simplified version of what happened in this video. Clear and concise. https://youtu.be/sH_F7mQIM0M

Short squeeze as well as citron vs Wallstreetbets...

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