The internet and the stock market are now interested in GameStop. This is because the GameStop shares have increased 1,500 per cent and lots of small investors motivated by social media used the classic Wall Street tactic to benefit from it. They are now putting the squeeze on big players of Wall Street. The stakes have become large. On Wednesday alone the GameStop’s value has become $10 billion. Then on Thursday, several trading platforms put restrictions on the stock so the shares decreased to 44%. GameStop owns many malls and shopping centres around the world. The company declined in the middle of 2010s because of the shift in video game sales to online stores.
But in 2021 the stock price of the company has increased rapidly because of the short squeeze. The headquarters of the company is in Grapevine, Texas, U.S. The CEO of the company George Sherman at this moment owns the 2.3 million shares of the company and the value of the shares are worth $730 million. At the end of last year, the GameStop’s net worth was only $2 Billion but now it is $23 Billion. Are you confused about all the GameStop news? Then here are the details about GameStop for your information.
What is going on with GameStop?
The event that happened in January is well known as the short squeeze. It is the thing where investors bet on the stock and it can either go up or down. The investors buy the share themselves to place the bets or they may buy the stock options. The investors who bet against the stocks are called Shorts. In the case of the GameStop, there are two shorts called two big hedge funds.
If an investor has to short a stock it means that they have to borrow the shares from a broker and sell them. Then with the agreement, the investor will return the shares. If the price decreases the investor has to buy back the shares and gain the difference. But the process of shorting a stock is a risky business because if the price increases the investor can lose big time. Sometimes the investors can make a bad bet. However, they can also lose if someone tries to increase the price by purchasing lots of shares. This is the Squeeze. The shorts have to purchase the shares they owe to their brokers and also have to return them. This will make the stock higher but the late shorts can get ruined.
However, these kinds of things happen only with the big shot Wall Street investors. But in the case of GameStop, it has happened because of small investors.
Why the stock of GameStop rising?
The amateur investors in the market are driving up the price of GameStop. Over the past years, some small traders have increased in the market. Therefore some of them are buying the shares of GameStop. They are betting on their option bets that are opposite to the shorts.
These bets are the contracts that offer them the option to purchase the stock in the future. If the price increases the trader can purchase the stock at a bargain and sell it for a profit. This is particularly happening in GameStop because of Reddit’s Wall Street Bets forum. This is the place where amateur traders gather to share memes and also trade tips.
These are the events happening with GameStop and with the investors in the stock market. Nobody knows when this frenzy will end.
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