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 ...
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.
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 ...
When will GameStop stock drop?
GameStop (GME) and AMC (AMC) shares are taking another beating amid a broader market sell-off. The speculative stocks are down now more than 50% over the last two months. On Monday, shares of the ...
What happened with GameStop stock in simple terms?
When it closed its short position and bought back the stock at these elevated prices, GameStop's share prices soared even further. The hedgefund's losses surpassed $13.1 billion — more than the hedgefund itself was worth. It has now declared bankruptcy.
Why is GameStop stocks crashing?
Key Facts. Shares of GameStop plunged 32% Wednesday after lukewarm earnings that met analysts' expectations, wiping out more than $4.5 billion from the firm's market capitalization, which ended Wednesday at $8.1 billion.
What went wrong with GameStop?
The company has been losing money for years as sales of video games increasingly go online, and its stock fell for six straight years before rebounding in 2020. That pushed many professional investors to make bets that GameStop's stock will decline even further.
Is the GameStop squeeze going to happen?
GameStop's share price also went through a large drop in pricing. A short squeeze, one year after GME gained traction on WallStreetBets, is unlikely to happen.
Is GameStop going to crash the stock market?
Over the past week, many people have asked me the same question: “Will the GameStop situation lead to a market crash?” The direct answer is an emphatic NO!
What did GameStop do with the money?
The company erased its long-term debt, paying off everything "other than a $47.5 million low-interest loan associated with the French government's pandemic response." While not enough on its own to reverse GameStop's loss of sales over time, freedom from debt will likely be a meaningful benefit to the company going ...
How much did hedge funds lose on GameStop?
Gabe Plotkin wasn't sleeping. His bets against meme stocks such as GameStop Corp. GME 6.81% were backfiring, and losses at his $12.5 billion hedge fund were mounting. Strangers angry about his wagers were bombarding him with threatening messages and texts.
What happened Robinhood GameStop?
Robinhood was founded to “democratize” the stock market, but when it halted trading, it went against its stated purpose and did not allow its individual investors to purchase shares of Gamestop stock.
What subreddit helped trigger the GameStop surge?
Some users of WallStreetBets (the subreddit community that helped trigger the GameStop surge) describe the pain that they and their families endured during the 2008 financial crisis and highlight how professional investors were never punished, Shue says.
What does Gamestop hype look like?
For regular people, the GameStop hype looked like an opportunity to break past barriers that exist in the way of making money. Some people perceive it like winning the lottery, Newcomb says.
Can you save a GameStop?
You can’t save a GameStop, you can’t probably save Blockbuster, but what you could do is kind of play around with it before it expires.”. That kind of nostalgia is appealing: Research has shown that nostalgia can combat loneliness, because it reminds us that we have social support and counteract feelings of boredom.
Is GameStop a brick and mortar company?
GameStop is a brick-and-mortar retailer that many young people grew up with, but that had been declining in recent years. “GameStop is sort of written off” as something that can’t compete with Amazon, van Dreunen says. (Other stocks that were targeted include BlackBerry, Blockbuster and Nokia.)
Why is GameStop’s stock price so high?
GameStop’s share price, which closed on Tuesday at $147.98 (it’s gone over $300 today) isn’t any reflection of its health or value as a company. It’s a reflection of a war between “retail investors” (individual day traders, or regular people) and institutional investors (big Wall Street firms).
What is a negative float on GameStop?
GameStop had more shares sold short than were actually in circulation, which is called “negative float.” Once WallStreetBets realized GameStop was in negative float (information that is easily obtainable ), it started putting the screws to the short sellers by refusing to sell, putting the share price into a kind of positive feedback loop.
What happens if a stock price is too good to refuse?
Usually, a share price would reach a too-good-to-refuse level, and there would be a run to cash in on it. While some people would make a lot of money, and others would lose big, the stock would return to a more normal reflection of the company’s true value and health.
Is GameStop a negative float?
Last week, one of them realized that GameStop was in a “negative float” position. This means that the number of “shorted shares” — that is, the shares loaned to investors that must be eventually returned — was actually greater than the number of shares available to trade.
Is Elon Musk involved in GameStop?
Reddit, social media, and now Elon Musk are involved. And somehow, this is all for GameStop, the beleaguered video games retailer notorious for giving gamers pennies on the dollar for their used software. It’s very hard to recap what is going on with GME, the ticker symbol that has become a hashtag, because the news in a volatile stock market ...
Does GameStop itself have anything to do with this?
No. The company’s last communication with investors was a Jan. 11 report on its 2020 holiday sales results (total sales down 3.1% from 2019, for those counting).
What does the Gamestop stock chart tell you?
One look at the GameStop stock chart tells you everything you need to know about how the short sellers are doing. Remember, they bet that the stock’s price would fall—hopefully to zero.
How much did GameStop sell in 2016?
Before just a few months ago, GameStop was going in the wrong direction. In 2016, the retailer had $9.4 billion in sales. That dropped to $8.3 billion by 2019 and fell off a cliff to $6.5 billion in 2020, thanks in large part to the economic ramifications of the pandemic.
How much money did GameStop lose in 2019?
Before just a few months ago, GameStop was going in the wrong direction. In 2016, the retailer had $9.4 billion in sales. That dropped to $8.3 billion by 2019 and fell off a cliff to $6.5 billion in 2020, thanks in large part to the economic ramifications of the pandemic. The company lost almost $800 million in 2019 and nearly $300 million through the 39 weeks through October 2020—it isn’t expected to turn a profit until 2023.
How much is GameStop worth?
A once-dormant brick-and-mortar retailer with sagging sales, GameStop was worth $300 million in August 2019. Today it has a market cap of almost $20 billion. Nobody knows what it’ll be worth tomorrow. GameStop has not invented an addictive new gaming platform.
How to short sell a stock?
You borrow shares of stock from a big institutional investor (for a small fee), sell the shares at the current market price and then wait for the price to decline. Once the price of your target stock falls low enough, buy back the shares, return them to the lender and pocket the difference.
What happens when you short sell a gametop?
GameStop’s rally exposes one of the problems with short selling: Your losses can be infinite. When you bet a stock will go up, your potential losses are capped, as the most a stock can do is go to $0. But with short selling, you’re exposed to potentially limitless losses—because a stock can make infinite gains.
Is GameStop a death watch?
The GameStop death watch did not sit well with one group of investors. These traders were not the Masters of the Universe or Wall Street sharks shorting the stock. Rather, they were anonymous investors who congregated on Reddit’s WallStreetBets forum, a chat room dedicated to discussing the stock market.
Why Is This a Problem?
This is because such sharp increases in stock prices can create bubbles in the market. If these bubbles get too big, the whole market can collapse, then risks a new financial crisis. Well... in this case, it would just make the current crisis bigger, a global recession is nothing to be sniffed at!
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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.
Sobering Quarterly Results
The only way GameStop can hold onto its gains is through delivering excellent quarterly results. Unfortunately, that doesn’t seem to be happening.
Turnaround Strategy
Ryan Cohen and his leadership are one of the main reasons a certain set of investors remains optimistic regarding the chances of GME mounting a comeback.
Time Could Be Running Out for GME Stock
On innumerable occasions this year, analysts predicted doomsday for GME stock. But each time these analysts have had to eat humble pie, yours truly included. Considering the year, we have had and GME’s status as an iconic meme stock, it might seem like the eventual drop will never happen.
How much money did GameStop have in the third quarter?
GameStop could certainly use the money. It ended the third quarter with almost $450 million in cash but has a long slog ahead of it to transition to a growing business again.
Why is GameStop squeeze so interesting?
The GameStop squeeze is interesting because institutions bet so heavily against the retailer's stock price, meaning they expected the price to fall, that when Reddit traders realized the number of shares sold short exceeded the number of shares outstanding, they banded together to buy out-of-the-money stock options.
What is the short squeeze in hedge funds?
What's happening to the hedge funds right now is a short squeeze of gargantuan proportions, or what's being referred to as a " gamma squeeze ," which is an acceleration in the price of a stock as investors buy up options contracts in ever-increasing amounts.
Why does the SEC prohibit short selling?
Rule 105 of Regulation M prohibits such sales under certain conditions because it upends the "independent pricing mechanisms of the securities markets."
How long has Rich been a Fool?
Author Bio. Rich has been a Fool since 1998 and writing for the site since 2004. After 20 years of patrolling the mean streets of suburbia, he hung up his badge and gun to take up a pen full time.
Why is it important to issue stock?
Issuing stock would help pave the way for growth, but it would come at the expense of existing shareholders who undoubtedly would not appreciate bailing out investors who were just actively trying to undermine their positions.
Does GameStop save them?
They are losing more daily as they're caught in a vortex from which they can't escape, though there is a way out and it's GameStop itself that could save them. If it does throw them this life preserver, it could massively benefit the retailer, too. Image source: Getty Images.
