Updated: Feb 4, 2021
The frenzied rise of the stock price of GameStop, a struggling video game retailer, has caught the eyes of the public. Small-time investors who coordinated on Reddit have quadrupled GameStop’s share prices and have caused traditional Wall Street investors and hedge funds losses worth millions. While Wall Street billionaires are worried about the new turn of events, the general crowd is thrilled that ordinary people are finally making money to pay off their financial obligations out of the miseries of the Wall Street honchos.
How did the share prices go up:
The surge in the GameStop stocks is contributed to by retail investors who coordinated on Reddit on subreddit r/WallStreetBets. The process in which the investors contributed to the rise of the share prices is a rather common practice in Wall Street, the only difference being that now the latter were at the receiving end. Usually for companies like GameStop, hedge funds borrow shares of the stock at a certain price, expecting that the prices will fall below the market estimate thus requiring them to pay less to the company whilst returning the stocks. However, Redditors have now gathered with vengeance coordinating purchases and hyping price rise which in turn has forced Wall Street investors betting against the stocks to buy them as well, the increase in demand causing the prices to further increase. As of February 2nd, 2021 stocks taking a significant plunge at 225 USD (5:38 AM GMT-5) indicating a fall of 31.50% nevertheless a good bargain price for a stock which was previously valued at single digit.
A trend or a one time wonder?
While many Wall Street analysts are dismissing this surge as a short-term trend, they have to be wary of what the internet and its users are really capable of doing. After the short selling of GameStop stocks went awry, Reddit users are already on the way of hyping prices of metal, in this case, Silver. As the hashtag #silversqueeze goes viral, retail sites have warned customers that they may not be able to keep up with the growing surge in Silver bars and coins. As of 1st February, 2021 Silver Futures surged as much as 13%, an all-time high in the past 5 months. While the silver surge in many places is being criticized as potentially useless as a particular post on WallStreetBets pointed out that there was no coordinated efforts on the front, the surge is likely to fail as the squeeze is ‘fake’ and will not yield returns. The Winklevoss twins, however, have tweeted in support of the move with Cameron Winklevoss tweeting “If the silver market is proven to be fraudulent, you better believe gold market will be next”. In an already volatile commodity market it will be rather interesting to see how far the average joe really takes Wall Street for a ride.