While most gaming fans have grown used to the contemporary forms of gaming community drama, like Twitch feuds and inefficient deodorant usage, it seems that 2021 is bringing many new things to the table. Most recently, a sudden attempt at “short squeezing” tied to GameStop, and led by an entire subreddit.
For those still unfamiliar, GameStop has been the hub of much controversy in the past several weeks. Thankfully for the company though, the controversy has little to do with anything it has done; rather, and simply put, clever amateur investors have flipped the table on a good number of people by instigating a rise in GameStop’s stock prices.
This effort was effectively organized and led by a Reddit subforum known as r/WallStreetBets, and led to similar events with a number of other similarly “shorted” companies, like AMC. Stock prices have been skyrocketing out of control for some days now, and it seems the investing and stock-trading app Robinhood has effectively decided to pick sides. The company has placed restrictions on stocks, including GameStop and AMC, citing “a volatile market” as the primary concern. Practically speaking, though, it means it’s trying to help investors save some skin.
As pointed out in the tweet below, Robinhood was bombarded with negative reviews immediately upon delisting GameStop, AMC, and others. Needless to say, the investors who theoretically triggered the short squeeze are upset that Robinhood would want to protect the investors shorting the stock. While both actions are generally considered unfavorable, hedge funds generally tend to short stocks without a worry, relatively speaking. Bluntly, people are upset that Robinhood is suddenly so quick to act when “the little guy” finally gets a break. Many have taken to pointing out the irony of the fact that Robin Hood is supposed to be the voice of the people anyways, not a champion of royalty.
Now, it should be noted that many readers might be wondering: what do terms like “short squeeze” and “shorted” even refer to? Simply put, GameStop was a company that people were generally considering to be failing. Investors (or traders), especially those working with hedge funds, often take advantage of this predicted failure by borrowing stocks from the company, selling the stocks, and re-purchasing them at an even lower price (because the company continues to “fail”).
“Shorting,” thus allows these investors to profit off of failing businesses. R/WallStreetBets collectively realized the extent to which this was being done to GameStop’s stocks, and also realized that GameStop might actually not be failing as awfully as was assumed. Thus, they began to buy GameStop stocks, which made them rise in price (instead of fall, as was expected by many people “shorting” the stock). Now, all of the people who were shorting GameStop and co. are being forced to buy back their stocks at unexpectedly ludicrous prices – the short squeeze. So again, Robinhood is being review bombed because of the fact it’s impeding the people trying to highlight the hypocrisy of stock shorting.
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