Name: Here’s why GameStop stock has spiked like crazy
Uploaded: 2021-01-29
Duration: 4 min 4 s
Description: And how it’s impacting hedge funds and trading partners.

And how it’s impacting hedge funds and trading partners.

Here’s why GameStop stock has spiked like crazy

Finance

Gamestop, a sleepy retail brand that has been going bankrupt slowly over the years, is suddenly the topic of discussion de jure. Everybody is obsessed with it, and here's why. So Gamestop stock is going crazy right now, and it's because there is a band of rebel retail investors on Reddit and online kind of message board forum community. They convene in a place called Wall Street Bets, and they have become obsessed with Gamestop stock as a result of short sellers, uh, betting against the company. If you want to understand what's going on with Gamestop, you have to understand short selling. There are funds out there who will take a position out against a company. They're betting that these companies are going to decline. Their stock prices are going to go down. Um, and in order to do that, they borrow stock, they borrow stock, they sell it, and then they have to eventually repay that loan. That stock they borrowed and they have to buy it again later. As a result, they hope that the stock will go down and that they can pocket that difference in price. But if the price goes up and they have to buy it again. Then that just adds more pressure on the stock. Uh, more upward pressure as people are buying it, and the short sellers actually actually have to buy it as well. Uh, suddenly you have this buying frenzy. It creates a feedback loop. Uh, and in the case of a stock like Gamestop, where there aren't that many shares outstanding, there isn't that much stock out there to trade. Um, because you have that scarcity of the actual stocks. All this pressure is just forcing it upward like a geyser. Citron Research, a notable hedge fund short seller, has had to call it quits on the stock. And you've got other ones like Melvin Capital Management. They've actually had to get bailed out, apparently by there by some other investors, including the hedge fund of Steven A. Cohen, who's a owner of the Mets baseball team. You might know him from that. Um, and they are having to basically throw some of these hedge funds a life raft because they're going to go. They're going to go belly up, uh, losing billions on this trade. Mm. Yeah. So, because of all this insanity, this craziness, this madness going on on some of these brokerage apps like Robin Hood like TD Ameritrade. Um, they have actually pulled the plug. They have stopped people from being able to buy stocks like Gamestop and some others that have gone crazy as well, Like BlackBerry and am see the movie theater chain. And instead, they're just allowing people to sell the stock to actually close out their positions. You have a bunch of people in Congress now who are actually calling for investigations of this, uh, aoc, um she has actually said that she thinks it is not right that Robin Hood has, uh, stopped allowing people to do these trades. Pretty stunningly. Ted Cruz from Texas Republican across the aisle, He has retweeted her saying that he supports that view. Um, you know, the fact that there is bipartisan support here, both Democrats and Republicans are finding something to agree on is pretty astounding. Uh, and it probably spells trouble for companies like Robin Hood. I think there's gonna be a thorough investigation as to what has gone on here. The SEC, the Securities and Exchange Commission is probably going to look at Reddit and at Wall Street bets and see whether there was any market manipulation going on. Um, there are a lot of questions to be answered. Uh, one the dust settles. Mm. Mhm.