You must have heard a lot about GameStop and AMC’s stock and the happenings at The Wall Street. What happened on the r/WallStreetBets subreddit, what’s a short-sell and why’s Elon Musk tweeting about it? Well, we’ve got you covered. Here’s what happened with GameStop shares, and how you can follow the latest updates on Reddit’s WallStreetBets.
What Happened With GameStop Stock?
On January 12th, the share of GameStop — an American brick and mortar video game selling store — closed at ~$20. The company, back then, was doing miserably due to COVID-19, and the market value of the company was around $1.3 billion. But, a lot was about to change. In a matter of 15 days, the stock price of GameStop went up to $350, with the market value of the company hovering around $22 billion. What happened during this time? Well, for that, you need to understand a term short selling and short squeezing.
What is Short Selling?
To explain what short selling is, let’s take an example of a stock X. Let’s say you own one stock of company X, which is currently trading at a price of $10. Now, a trader borrows this share from you and expects the price of the stock to go lower than $10. So he sells the stock at $10, and when the price of the stock is at $7, he purchases it again in order to return the share to you. Thus making $3 in this case.
Hedge funds do this at a scale. They ‘bet’ on a failing company’s shares, expects their share price to go down, and make a profit out of it. It can all go wrong too. If the price of the share goes up, let’s say to $12, the trader would incur a loss because he still owed you a share. The trader in this case would have to spend an extra $2 from his own pocket to buy the share and then return it back to you.
Now what traders generally do in the second case, when the stock price starts to go up instead of down, traders start buying a lot of shares. This leads to a sharp rise in the share price of the stock. This situation, where the trader is buying the stock to cover his loss, is referred to as a short squeeze in the stock market.
So Where Do GameStop and r/WallStreetBets Come Into Play?
The GameStop stock was doing miserably. The company’s shares hovered around $15 during normal trading days, and it was looking all low with COVID-19 affecting its business. Some hedge funds had placed their ‘bets’ on the company that it would run out of business soon, and the stock price would go very low. These hedge funds found a way to make money out of a company’s misery.
Now, the people over at Reddit’s r/wallstreetbets started motivating each other into buying GameStop’s stock so the price of its stock would rise, hitting right back at the hedge funds, who now will have to buy stocks at a higher price, and also making Redditors some money. Elon Musk, in between all of this, tweeted “Gamestonk!!”, and as you would expect, the stock price skyrocketed.
— Elon Musk (@elonmusk) January 26, 2021
How to Follow Updates?
Well, if you want to follow updates on the current happenings with the GameStop shares, these are the steps you should follow.
- Download the official Reddit app for iPhone. Alternatively, you can even download Apollo for Reddit.
- After signing-up on the discussion-based social media, tap on the ‘search’ bar on the top and search r/wallstreetbets.
- Alternatively, you can use this link to directly go to the subreddit — r/wallstreetbets.
Now you can follow all the updates directly from the subreddit.
If you’re intrigued by all the happenings at the stock market and are looking to invest in stocks, these are the best stock trading apps for iPhone.
We Want to Hear From You
What are your thoughts on this? Did you buy a GameStop (or AMC) share? Do let us know in the comment section below!