Full Answer
Why did GameStop stock rise?
GameStop Corp. (NYSE:GME) shares, rose in value on Thursday, February 17, with the stock price down by -3.83% to the previous day’s close as strong demand from buyers drove the stock to $123.41. Actively observing the price movement in the last trading ...
Did GameStop issue more shares?
The extreme rise for heavily shorted stocks has seen some companies take advantage by issuing new shares, allowing them to raise millions in cash more easily than would have been possible just a few weeks ago. But GameStop, the brick-and-mortar video game retailer at the center of the storm, has made no such move.
What happened to GameStop stocks?
There has been some buzz around GameStop recently after the company officially announced Immutable X as its blockchain partner for its upcoming NFT Marketplace. Shares of GameStop are still down by over 24% in 2022, as the stock trades at some of its lowest levels since the original short squeeze in January of 2021.
What happened with GameStop stock?
This phenomenon is known as a short squeeze. And it worked spectacularly well. GameStop's stock price enjoyed gains through most of January 2021, but they exploded late in the month and peaked on Jan. 28, reaching a record high of $483. Shares of ...
Why has GameStop stock surged?
In January and February 2021, the stock climbed 1700% in one week, largely thanks to the efforts of a group of Redditors on the subgroup r/WallStreetBets. Compared to the millions retail investors won (and lost) last year, the gains of roughly 100% this week may seem like playing small.
How is GameStop stock still high?
The Ape Buzz Continues Since GameStop investors kicked off the meme stock frenzy in early 2021, share prices have remained sky high. That's because the GameStop "apes" — as members of meme stocks' cult-like followings are called — are stubbornly holding onto the stock.
Why GameStop stock soared?
As retail investors began to buy up its shares and options — many of them egged on by Wall Street Bets and other forums — its stock began to surge, forcing the short-selling hedge funds to buy back the borrowed shares at a higher price, which itself pushed the stock price higher.
How did GameStop stock go up explained?
It's what happened with GameStop's stock. When a stock is very heavily shorted, a rise in its price can force short sellers to get out of their bets. To do that, they have to buy the stock, which pushes the stock even higher and can create a feedback loop.
Is it smart to invest in GameStop?
Gamestop (GME) stock is likely to decline after the current overheated rally. The stock can still be profitable in the long term if revenue growth stays consistent. But investors should avoid buying GME stock due to the high short-term risk.
How high can GME short squeeze?
You can sell it at $10 and then be forced to buy it back at $20 … or $200 … or $2 million. There is no theoretical limit on how high a stock can go.
How the GameStop short squeeze happened?
More than a year ago, the GameStop saga began when traders on Reddit banded together to organize mass buying in certain stocks in a bid to initiate short squeezes in the market. Reddit traders were hugely successful in their attempt to force hedge funds to liquidate their short position in GameStop.
What is GameStop scandal?
There's was also a lawsuit filed on Jan. 28 in the Southern District of New York accusing Robinhood of "purposefully, willfully, and knowingly removing the stock 'GME' from its trading platform in the midst of an unprecedented stock rise ... deprived retail investors of the ability to invest in the open-market."
How does short squeeze Work?
A short squeeze happens when many investors short a stock (bet against it) but the stock's price shoots up instead. If a stock's price rises quickly, then short sellers sometimes scramble to close out their positions as rapidly as possible.
How GameStop stock works?
In a short sale, they borrow a share of GameStop and then sell it. Later, if the stock price does as they expect, they can buy the stock at a lower price and keep the difference. GameStop is one of the most heavily shorted stocks on Wall Street.
What caused GME short squeeze?
A short squeeze can happen organically when a stock's price rises based on market conditions, such as good financial news. It can also happen purposefully, when investors target a heavily shorted stock to drive up its price knowing that short sellers must cover their positions before the stock's price gets too high.
How fast did GameStop squeeze?
GameStop is an American video game and gaming merchandise retailer, the shares of which closed at under $20 per share on January 12, 2021. In around 10 trading days, a series of short squeezes occurred making the stock price jump over 15 times, eventually resulting in a stock price as high as $500.
What happens when you short GameStop stock?
One of those was British hedge fund White Square Capital, according to published reports. During a short sale, the investor borrows shares of stock from a third party then sells those borrowed shares on the open market. Some time later, the investor buys back the same number of shares and returns them. If the share price falls, the investor can buy back the borrowed shares for less than he or she originally sold them and make a profit.
What is a gametop?
GameStop is a small retail company that sells video games and accessories, with a particular emphasis on the secondhand market. It has struggled in recent years. The video game industry has moved to online delivery, largely eliminating both the physical retail market and the secondhand market in a single blow, and the shopping malls that GameStop built its physical brand around have increasingly vanished. (GameStop is and has always been the kind of place you go between trips to Hot Topic and the food court, a lifestyle about as relevant to modern life as MySpace pages and a Prodigy account.)
Why did hedge funds short GameStop?
The hedge funds that shorted GameStop did so because they believed the underlying company has a weak business model. And several of them paid a colossal price for that calculation: For example, White Square Capital, which reportedly suffered double-digit percentage losses shorting GameStop, announced in mid-2021 it was closing its doors, according to published reports. Meanwhile, the Reddit investors looked at how a short sale works. They didn’t invest in GameStop; they invested in the mechanics of investing itself.
What are Krugman's three rules of stock market?
Economist and New York Times columnist Paul Krugman has summed this up with his three rules of stock prices: “First, the stock market is not the economy. Second, the stock market is not the economy. Third, the stock market is not the economy.”. This is the environment in which the GameStop rollercoaster took off.
When did the GME stock surge?
The disconnect between a stock’s share price and the company’s performance were writ large during the GameStop (GME) stock price surge at the end of January 2021. The combination of irrational exuberance and a concerted buy effort promoted on the WallStreetBets Reddit channel boosted the stock to astronomical heights untethered to more mundane fundamentals like price-t0-earnings ratio.
How long do you hold stocks?
However in recent decades this has changed. Modern investors tend to hold their assets for less than six months, a figure that is trending steadily downward as holding times get ever-shorter. Algorithmic trading, day trading and the explosion of retail-oriented investment products have all contributed to this trend, making it ever more popular and profitable to buy and sell stocks quickly.
What to do when you unpack the newfangled social media-driven market swings?
As you unpack the newfangled social media-driven market swings, exercise caution and seek out trusted experts: An experienced financial advisor in your area can provide hands-on guidance.
When did DFV buy GameStop?
And he did it through call options—contracts that give investors the right to purchase shares at a fixed price on or before a certain date. Per the magazine: In this case, DFV bought in 2019 the right to buy GameStop stock on January 15, 2021, at $8 a share.
How much did DeepFuckingValue make in 2019?
User DeepFuckingValue, who has been called the "granddaddy" of the GME stock market surge, is perhaps the most notable figure in this insane situation. According to Esquire, DFV managed to turn a $53,000 investment, which he made in 2019, into more than $22 million by this beginning of this week.
Is GameStop closing in 2021?
Image via Getty/Michael M. Santiago. GameStop, a company that was expected to close hundreds of stores in 2021, has made a stunning comeback in the stock market. And it's all thanks to an army of Reddit users who were gutsy enough to take on big Wall Street. According to CNBC, GameStop's share price went from under $20 at the beginning ...
The investor who has been credited with sparking interest in the video game retailer buys more shares
Evan is a Senior Technology Analyst at The Motley Fool. He was previously a Senior Trading Specialist at Charles Schwab, and worked briefly at Tesla. Evan graduated from the University of Texas at Austin, and is a CFA charterholder.
What happened
Shares of GameStop ( NYSE:GME) surged by as much as 20% today after Keith Gill, known by "Roaring Kitty" on social media and a more vulgar username on Reddit, increased his stake in the video game retailer. Gill has been widely credited with driving retail interest in GameStop, which culminated in a gargantuan gamma squeeze last month.
So what
Gill posted an update on Reddit's WallStreetBets forum on Friday evening showing that he had increased his position from 50,000 shares over two weeks earlier to 100,000 shares . The fresh investment increased Gill's average cost basis from $14.89 to $26.80.
Now what
The news comes after Gill testified virtually last week in front of the U.S. House Committee on Financial Services, which has been examining the saga over concerns around potential market manipulation and the possibility of individual investors being hurt.
What happens when you short a gametop stock?
It's what happened with GameStop's stock. When a stock is very heavily shorted, a rise in its price can force short sellers to get out of their bets. To do that, they have to buy the stock, which pushes the stock even higher and can create a feedback loop.
Where is GameStop located?
It’s still struggling. GameStop, based in Grapevine, Texas, sells video games at more than 5,000 stores, and the pandemic has been keeping customers away. More worrisome is the long-term shift by customers away from brick-and-mortar stores and toward buying games online.
How do investors make money off of a stock falling?
It's how investors can make money off a stock falling. In a short sale, they borrow a share of GameStop and then sell it. Later, if the stock price does as they expect, they can buy the stock at a lower price and keep the difference. GameStop is one of the most heavily shorted stocks on Wall Street.
What happens when you buy stocks on margin?
When they buy stocks “on margin,” they're using borrowed money, which can supercharge their gains and losses. With options, an investor can buy the right to buy the stock at a later date at a certain price. If the stock hits that target, investors can reap a bigger return than if they simply bought a share.
Where is Gamestop in 2021?
The Associated Press. Pedestrians pass a GameStop store on 14th Street at Union Square, Thursday, Jan. 28, 2021, in the Manhattan borough of New York. Robinhood and other online trading platforms are moving to restrict trading in GameStop and other stocks that have soared recently due to rabid buying by smaller investors.
Is buying GameStop about greed?
Buying GameStop “isn’t about greed,” one user wrote on Reddit, after citing all the recessions “they” caused and the times "they” got bailed out with taxpayers’ dollars. “It’s about taking back what’s ours, what we’ve already paid for.”
Do Wall Street bets have a group?
Yes, particularly those in a group called “WallStreetBets.” Their discussions are full of ideas for the next big trade to jump on, self deprecation and an appreciation of both winning and losing bets, as long as they're bold. They've recently been encouraging each other to keep buying GameStop and push it ever higher, or “to the moon."
What happens if GameStop sells off?
If the sell-off is big enough, it could have a cascading effect that leads to broader losses for investors who have never bought or sold a share of GameStop.
Why is GameStop so valuable?
Exactly why GameStop’s value — on paper, at least — has rocketed to stratospheric levels has to do with a mix of traditional investing, rampant enthusiasm, stock market mechanics and the belief that anyone with a Robinhood account can meme a fortune into existence.
What happens when you short a stock?
When the price falls, you buy back the shares and pocket the difference. But shorting a stock is risky — if the price rises, you can lose big. Sometimes you just make a bad bet. But you can also lose if someone tries to push up the price by buying lots of shares, even though the company isn’t doing anything different.
What is it called when you bet against a stock?
Investors who bet against a stock are called “shorts.”. In GameStop’s case, the shorts include at least two big hedge funds. Shorting a stock essentially means borrowing shares from a broker and selling them, with the agreement you’ll return the shares later. When the price falls, you buy back the shares and pocket the difference.
What is an option bet?
These bets involve contracts that give them the option to buy a stock at a certain price in the future. If the price rises, the trader can buy the stock at a bargain and sell it for a profit. (In practice, lots of traders just sell the options contract itself for a profit or loss instead of actually buying the shares, but this description suffices for our purposes.)
What does it mean when a stock increases in demand?
That increases demand, which increases the stock’s price. Which means the brokers have to buy more shares, which means … you get the idea.
Does the bubble affect bettors?
This weird little bubble doesn’t just affect the bettors, though. If big investors on the losing side of these trades have to raise money to cover their losses, it could mean dumping enough shares to hurt the prices of otherwise solid stocks.
