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Gamestop article and permission to publish here provided by Jean Nichols.
GameStop
GameStop is a famous American company that was started in 1984 by James McCurry and Garry M.Kusin. GameStop is a company that provides consumer electronics, video games, and gaming merchandise retailing services.
Price history of the GameStop stock
The price of GameStop stock in 2018 was 18 US dollars, and at this time, it was the same average rate of stock according to the company’s growth. On 2 January 2019, the price decreased to 15 US dollars, and in the first month of 2020, it went down by 10 US dollars, which means the cost of GameStop was 5 US dollars, which was very low.
Short Selling
There would always be a factor behind the stock’s growth or the stock’s sinking, and short-selling was the factory that immediately increased the price of the game stock. Of course, some people will short-selling to earn a profit, but sometimes short-selling becomes the reason for the loss, and it is also in the case of GameStop shares.
What is short sellin g?
Before going further into the deep story of the GameStop stocks, we must first understand what short selling is. Short selling means selling the shares at the market price, and when the price goes down, purchasing the shares to earn profit.
Hedgers want to short selling of GameStop stocks
Hedgers are the persons who trade the stock to earn money, and they also do short selling if they are unable to make money through trading or holding. So many hedgers wanted to short sell the GameStop shares and wanted to book huge profits. So, they start borrowing the claims from the brokers and start selling.
Reddit users
Reddit users know that some hedgers are trying to short sell the game stock shares. Reddit users already discussed holding the shares until the hedger gets into trouble. So, they started buying shares when hedgers were selling. Now hedgers got into trouble because stocks were at a negative flow, and they had no more shares to sell.
An army of individual traders is battling short sellers -- with the help of Elon Musk and Chamath Palihapitiya
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What happened
Shares of GameStop ( NYSE:GME) extended their torrid recent gains on Tuesday. By the close of trading, the video game company's stock price was up a stunning 92.6%.
So what
GameStop's shares are now up more than 1,000% since the beginning of the year. Analysts say the stock's staggering ascent is due largely to a short squeeze, driven by a slew of individual investors who are coordinating their buying efforts on sites such as Reddit and Twitter ( NYSE:TWTR) .
Now what
As of 6:20 p.m. EST, GameStop's shares are up an additional 40% in after-hours trading. The sharp upward move followed a tweet by Tesla CEO Musk that linked to a popular Reddit message board, which many GameStop bulls have used to promote the stock.
Why is GameStop up?
GameStop was languishing below $5 a share as recently as September, but it began to rally after Ryan Cohen, the entrepreneur founder of Chewy.com, took a stake, saying the struggling mall retailer was ripe for a turnaround. On Jan. 11, GameStop said it would add three new directors to its board.
Why are BlackBerry, AMC Entertainment and Bed Bath & Beyond up, too?
It’s not just GameStop that’s surging but a whole group of companies, and with most of them there’s a common thread — they’ve been heavily shorted by big Wall Street firms. That makes their shares prone to spike on any good news, as investors who have shorted the stocks are forced to cover their positions by buying back the shares.
Why are the gains so huge?
In addition to the above-mentioned short interest that makes these stocks prone to spike on good news, individual investors in recent weeks have been using options that are further enhancing the effect. Particularly popular on WallStreetBets are “call” options, which enable investors to buy stocks at a predetermined price in the future.
Where is all of this headed?
Asked this week whether to keep buying GameStop stock at such lofty prices, a Reddit user responded, “You’re good until Friday.” That could indicate that the WallStreetBets crowd may have some sort of plan in place.
1. The Power of the Subreddit
The biggest driver of GME's performance is shareholder sentiment. Since January 2021, the stock has been trading at odds with its fundamentals.
2. GME Has Weathered Worse
It's no news that GameStop stock is highly volatile. Shareholders and new investors need to keep in mind holding a position in GME is a roller coaster of emotions.
3. The Potential for a Short Squeeze
Finally, the chances of further short squeezes remain for GameStop. With the sharp drops suffered by GameStop stock since November, short sellers have been increasing their short positions in GME.
How much did GameStop stock cost in 2020?
For the entire first half of 2020, its stock was trading for less than $10 a share, even as the pandemic led to a surge in the usage and popularity of video games. GameStop, in the early days of the pandemic, got a wave of bad press for declaring itself “essential,” and for one store reportedly ordering employees to return to work ...
Is GameStop a declining company?
For much of the last few years, GameStop has been seen as a declining brick-and-mortar retailer.
Is GameStop essential?
GameStop, in the early days of the pandemic, got a wave of bad press for declaring itself “essential,” and for one store reportedly ordering employees to return to work with their hands wrapped in plastic.
Is GameStop a brick and mortar company?
For much of the last few years, GameStop has been seen as a declining brick-and-mortar retailer. For the entire first half of 2020, its stock was trading for less than $10 a share, even as the pandemic led to a surge in the usage and popularity of video games.
Completely Efficient Markets Are Not Realistic
Even staunch advocates for efficient markets, generally don’t believe markets are accurate everywhere all the time. There needs to be some so-called friction in markets in order for investors to exploit and make money.
Ultimately Prices Are Where Buyers And Sellers Meet
Finally, prices are where buyers and sellers meet. No one argues that efficient markets are broken when a company that’s due to be taken private at a fixed cash price doesn’t see it’s stock rally because it reports a strong quarter before the deal closes.
