Retail trades were coming in so quickly that commission-free investing platform Robinhood had to limit buys for many of its members, prompting furious responses – and at least a dozen lawsuits. Matt also served as The Oxford Club’s Editorial Director for two years. Robinhood’s decision to restrict GameStop trading drew heavy criticism across the board, with complaints from traders, members of Congress, and a wide variety of big names in business and entertainment. SPX. Long-term, fewer and fewer gamers actually journey out to physical stores to purchase their games. Matt’s claim to fame is that he’s interviewed two U.S. presidents and has spoken with five Federal Reserve Chairs from Paul Volcker through Jerome Powell. Markets Insider reported that GameStop closed at $101.74 per share on Friday, which was up … In many cases, these companies have become the target of investigations by regulatory agencies, and many were forced to correct deficiencies or cease operations. Amateur retail investors couldn’t help but think that what happened next proved the “little guys” are at a disadvantage. Short-term, the COVID pandemic has kept and continues to keep shoppers away from all types of retail locations. It is worth noting that the WallStreetBets forum was shut down for about an hour on January 24th as the GameStop buying frenzy began to threaten large hedge funds. In some cases, members reported that Robinhood forced the sale of their shares or cancelled outstanding orders. While some of them say they believe in GameStop's future, others are attracted to … GameStop stock rose from $17.25 on the first trading day of 2021 to $347.51 earlier this week. The COVID-19 pandemic and the required closure of stores (and restaurants, and movie theaters…) made things harder for them and precipitated an even faster fall of its stock price. Tesla’s Elon Musk dove into the fray definitively on the side of WallStreetBets. Certainly, it has lost the trust of many clients, and the platform is likely to lose members. Group members are passionate about their cause – whether it is improving their financial situation, “punishing” Wall Street, or both – and if these new tactics don’t work, they may find an alternative that does. The volume of trades exhausted Robinhood’s resources, and trading had to be restricted to stay in compliance with regulatory requirements. BU Today: Why did GameStop’s stock go down in the first place?. Last time, many GameStop bulls felt cheated because of the trading restrictions Robinhood and other brokerages put on the stock. Sure, Tesla (Nasdaq: TSLA) is up 643% over the past year, which itself is a moonshot for any stock and a windfall for early investors in the electric vehicle maker. The stock didn’t go down – and in fact, it rose by more than 1,000 percent. The situation was so dire that on January 25th, it needed a bailout from other firms to survive. Why Did GameStop Stock Go Up? That Tweet electrified the crowd, and additional buys came pouring in. Several major hedge funds looked at GameStop’s books and decided that the company was doomed to fail eventually. Both Citadel and Point72 have lost money in their investment thus far, though they clearly expect Melvin to recover in coming months and years. For its part, Citron Research announced that it will no longer offer opinions on which companies are good candidates for short sellers. However, it appears that the damage is done, and many detractors have sworn off Robinhood in favor of alternative platforms. Once the dust settled and all of its positions closed, hedge fund Melvin Capital emerged as one of the hardest hit by the GameStop roller coaster. So why did GameStop stock rise the way it did this month? A disc-less (or cartridge-less, if you’re Nintendo) future is closer than it has ever been. Sales growth is sluggish as fewer gamers need to go to stores -- or even shop online -- … It’s the equivalent of buying low and selling high, just in reverse order. The firm bet against those companies by short-selling shares, and many large investors like hedge fund Melvin Capital followed Citron’s lead. And no matter what the price of GameStop stock indicates, its fundamentals – and its future prospects – remain iffy, at best. Institutions that were “short” the stock found themselves squeezed because they needed to return the shares they had borrowed and sold. Hedge funds lost billions after betting that GameStop prices would go down, and the market as a whole had its worst week since October 2020. But if you’ve been asking, why did GameStop stock rise the way it did, now you know. If you look at the chart of GameStop stock so far this year, you’ll see something truly astounding. GameStop's stock has had a wild week, up as high as $468 and down as low as $69 and often fluctuating wildly in the course of a couple of hours. The stock was down more than 29% Thursday. EXPLAINER: Why GameStop's stock surge is shaking Wall Street. This sent the stock price up rapidly and created what is called a short squeeze. Here’s what you need to know. “The stock can get pushed up so that at some point the short-sellers will fold and make the stock go higher. GameStop (NYSE: GME) is primarily a bricks-and-mortar video game retailer with more than 5,000 stores. The recent short squeeze involving GME stock prompts investors to consider our social media age. Why is GameStop up? Andrew Left founded Citron Research to provide retail investors with the information necessary to make smart decisions. The meteoric rise in GameStop's stock price is being called a short squeeze by most. Rarely can small-time retail investors outduel the big institutions. He wrote about markets and economics for U.S. News & World Report, Bloomberg News and Investor’s Business Daily, among other publications. ... hoping for GameStop stock to soar as it did in January. Sales are falling at a 30% annual rate. And some have begun to consider it a dying business. It’s about the little guys – retail investors trading on Robinhood and other stock trading apps – trying to outsmart the big guys – the hedge funds and other institutional investors. Well, in the long-run, fundamentals – sales and earnings – drive stock prices, despite wars between the longs and the shorts, the believers and the naysayers. Nobody caused a bigger jump than Elon Musk, who tweeted "Gamestonk!!" After starting the month under $20 per share, GameStop stock shot up to a peak of $483, then drifted down a bit to close just below $330 per share. WallStreetBets made it clear that while they were enjoying the financial gains, a big part of their victory was beating Wall Street at its own game. Matt has worked as an editorial consultant to the International Monetary Fund, the World Bank, the Economist Intelligence Unit and other global macro-institutions. Several major hedge funds looked at GameStop’s books and decided that the company was doomed to fail eventually. A company that’s in two businesses—retail and physical media—that are both in long-term decline, GameStop … This was supposed to be the beginning of earnings week on Wall Street, when companies answer questions about their most recent sales and profit numbers. But Redditors are snapping up shares and stock options in GameStop en masse, knowing their momentum together is sending the stock price up. As a result of results like that, GameStop stock had been drifting lower for years. Nine months ago, GameStop stock bottomed out at $2.80 a share, a reflection of the myriad problems facing the retailer specifically and brick-and-mortar game retail as a whole. These small investors collaborated (in a legal way) on discussion sites like Reddit to bid up the price of GameStop stock. What makes this roller coaster unusual is why the Reddit community is buying up GameStop shares. So they bet against GameStop stock by shorting it. Despite GameStop’s bleak outlook, last year a well-known investor named Ryan Cohen increased his holdings of GameStop stock to more than 10% of the company, with hopes of transforming the mainly physical retailer into more of an online player. Trading has been halted repeatedly, as the markets try to slow down the insanity, but to no avail. At the moment, there are a lot of questions on whether the company will move forward with its original plan or delay the IPO until the current negative sentiment towards its brand has been resolved. GameStop has held on in part thanks to its business in used-games (which are cheaper, and which you can’t simply download) and because of high demand for the new PlayStation 5 and Xbox Series … A Reddit lurker explains why he bought GameStop stock during its meme-fueled run-up. In fact, the eventual fall of GameStop stock may have already begun. The company had a net loss of $18.8 million, or 0.29 per share. The last week of January delivered a shock to the market. Typically, only seasoned investors with substantial resources attempt it. GameStop’s shares started to rise late last year, after the founder of the pet-supply site Chewy bought a stake in the company and got a spot on its … The biggest reason for GameStop's rise this week was a Monday announcement of holiday sales and new board members. People who were out of work, out of school, and under stay-at-home orders started dabbling in the stock market. Pedestrians pass a GameStop store on 14th Street at Union Square, Thursday, … Fernando Zapatero: GameStop was a struggling company, [like] many other retailers facing competition from online sales. Pantries across the U.S. stocked up on the protein “miracle cure” for everything from weight loss to muscle building, and GNC’s stock rose from $15 in 2012 to almost $60 by the end of 2013. What this means for Robinhood’s future is hard to predict. As Chief Investment Expert Alexander Green wrote yesterday, “I won’t predict whether the [GameStop] bubble bursts this week, next week or next month, because it isn’t possible to make rational projections about when irrational behavior will end. Retail trades were coming in so quickly that. So, the institutions had to purchase GameStop in the market, at market prices. Citadel and Point72 Asset Management offered $2.75 billion to Melvin Capital in exchange for non-controlling revenue shares for three years. This time, however, the little guys seem to have won – at least for a brief moment. Instead, they download them. Such a meteoric rise is unheard of in the stock market. The Reddit forum WallStreetBets was integral to the rise of GameStop stock. Musk sent out a Tweet to his 44 million followers with just one word, “Gamestonk”, and a link to the WallStreetBets forum on Reddit. It is not yet clear how the events of late January will impact Robinhood, both in the short-term and the long-term. Retail trades were coming in so quickly that commission-free investing platform Robinhood had to limit buys for many of its members, prompting furious responses – and at least a dozen lawsuits. Well, it’s about much more than this one small and somewhat insignificant stock. GameStop Has to Go Down But the Implications Are Strange. Firms with short positions were forced to buy at the higher prices to close out short positions, which pushed share prices up even further. But the rise of GameStop stock over less than a month dwarfs Tesla’s performance. Now, the stock is on the rise again and fans are curious again about why that’s happening. News agencies couldn’t keep up with the action, and social media was saturated with GameStop-related chatter. GameStop has had an incredible run from $20 to $325 in the past 2 weeks, fueled by a combination of short squeeze and gamma squeeze. Of course, that was before the massive surge. Lots of small investors – presumably many of them gamers themselves with an affinity for the video game retailer – latched onto this comeback tale and bought in. GameStop, AMC and several other stocks are once again rising today. Citron is best known for its “short reports”, which demonstrate through research and analysis that specific companies are likely to lose value. When Financhill publishes its #1 stock, listen up. 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