GameStop has been at the center of controversy before. Just last year it drew a tide of criticism for trying to stay open at the start of the COVID-19 pandemic, claiming it was an essential business. Despite that debacle and everyday criticisms like GameStop‘s return policies, it remains one of the most widespread video game shops in the United States. Right now GameStop is making headlines again, but not by its own volition. GameStop’s stock is surging in value and investors are buying up as much of it as possible. It’s gained hundreds of dollars in value over just a few days.
Naturally, those outside the world of stock exchange can’t help wondering what’s going on here. It turns out a subreddit is responsible for kicking off a movement to buy up as much of GameStop’s stocks as possible. Raising its value this way means that short sellers on Wall Street that were using GameStop to turn a hefty profit are now at risk of bankruptcy. The stock’s value is still climbing; it’s hard to say when this will stop. In fact, it looks like GameStop’s situation is going to spread to other companies before it wraps up.
The situation starts in a very different place from where it began. Not too long ago, GameStop’s stock was really low value, partially because of short sellers, investors who borrow other people’s stock and sell them in the hopes of buying them back later at a profit. While short selling with the intent of lowering a stock’s value is common, it went very far with GameStop, and the company was starting to lose value. All the while, the hedge fund managers busy short selling were making a lot of money at the game store’s expense.
Everything changed when an investing subreddit called Wallstreetbets found out about the situation. Reddit users figured out that short sellers weren’t investing wisely — they were trying to trade more GameStop stocks than there actually were on the market. Wallstreetbets took issue with the short sellers’ practices, which jeopardized GameStop financially. In order to get back at the short sellers, they encouraged as many people as possible to buy GameStop stocks. The more stocks Wallstreetbets and its sympathizers took off the market, the bigger the short sellers’ financial hole became. Without stocks to trade to please their collaborators, they were nearing bankruptcy.
GameStop’s rocketing value comes from Wallstreetbets and all the other buyers going all in on GameStop. The massively increased demand for the stock means its value goes up tremendously. Layman investors are turning huge profits by boosting GameStop’s value, and they’re simultaneously driving short sellers out of the market for engaging in practices that Wallstreetbets and its allies consider predatory. Short sellers are now trying to make their money back by doing the same thing to other companies. However, the issue has gotten so much public attention that casual investors are prepared to buy up whatever stock possible to block short sellers.
It’s hard to say if this means anything for GameStop in the long term. Some are expecting GameStop’s value to fall again once the internet’s war with Wall Street corporations dies down. For now, some of GameStop’s top executives have made a lot of money thanks to their shares of the company. It doesn’t seem likely that the temporary boost in value will improve the lives of store personnel, though.
The fighting isn’t over. AMC’s value is way up as investors suddenly buy in, expecting short sellers to try to make lost revenue back via AMC. GameStop can go back to focusing on its internal tasks if investors move on to another company. GameStop has had a hard time competing with digital outlets. It’s become more and more convenient for consumers to order games from home and have them delivered or download them straight off of digital marketplaces. Maybe GameStop can find a way to turn the publicity about its market value into the tangible value of consumers shopping at GameStop.
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