Last week, 2021 brought us a new level of glorious hilariousness which is the rise of GameStop stock in the New York stock exchange. Let me back up a bit so you can get the full scope of the gist of how one of the most obsolete companies, products, and services on planet earth is the epicenter of the current financial climate.
GameStop was obviously a company and a stock deep in the pits of failure because everybody downloads their games and everything is digital. GameStop’s inability to innovate made them obsolete. Then comes Andrew Edward Left from Citron Research, an activist short seller trying to short GameStop stock.
What is shorting a stock? Short selling involves borrowing a stock and immediately selling it; if the stock price drops, investors make money by purchasing shares at the lower price and returning the shares to the lender.
After Andrew Left publicly indicated that he was going to short GameStop stocks, the “Wall street bros” on the social media platform called Reddit took offense to that. Basically, the gaming nerds always discussing their games and that stock took offense to Andrew putting GameStop in the crosshairs. They then decided to come together and buy GameStop stock with the aid of apps like Robinhood (let me add that this definitely one of the powers of the internet). When they all decided to buy the stock, the price went up. This led to Andrew and all the other people that listen to him about shorting and decided to short also, experiencing what is called a short squeeze.
What is a short squeeze? A short squeeze occurs when a stock or other asset jumps sharply higher, forcing traders who had bet that its price would fall, to buy it in order to forestall even greater losses.
One of the subreddits involved in this called “ wall street bets”, proceed to cross the line by sending Andrew and his family death threats, which Andrew went on to turn all those messages over to the FBI. He then publicly states that he would no longer be talking about this stock. After that announcement stock rises again because now it looks like David has beaten Goliath. Remember when I mentioned apps like Robinhood, well Robinhood, and others restricted buying of GameStop and other stock in this big bubble because of volatility, namely AMC stock, Blackberry stock, and Nokia stock.
Before we get to my thoughts, I want to show you the very bad takes that I saw on this matter.
First we have someone that thinks GameStop is dirty trick from Steve Bannon to mess with Biden administration?
Then we have someone that thinks that this happened because Reddit “Wall street Bros” are starved of sex?
Then we have someone that somehow tried to tie Trumpism to this?
We also had a former SEC commissioner somehow compare this short squeeze to what happened at the US capitol building on January 6th?
This short squeeze also made “rich rich” people very angry.
This matter also found a way to unite both republicans and democrats which is genuinely a miraculous feat considering how polarized the current political climate is.
My thoughts
1 This is clearly a pump and dump that is going to end badly. I get what Robinhood may be trying to do, trying to reduce how bad this gets (even though I do not agree it would make any difference).
2 This is a middle finger to the establishment/elites. Sure not everyone is doing this as a way to show the elites (some are definitely seeing this as a fast money grab). Still, this has a level of trying to show the elites pepper. This explains why some people are so committed to holding the line.
3 This is also quite hilarious and entertaining to observe. Feels like I am watching wolf of wall street or some other movie like that.
