GameStop stock was the most traded in the US yesterday, ahead of the usual takers such as Apple and Tesla.
The rise of GameStop has taken Wall Street by storm in recent days, after a group of tech-savvy Reddit users joined forces to increase the video game retailer’s share price tenfold in a matter of weeks.
It all started when hedge fund Melvin Capital betted against GameStop by short-selling its shares, meaning it stood to gain if GameStop value went down and lose if it went up.
If it weren’t for the meddling smarts of the internet, the hedge fund may have succeeded. However, Reddit users, determined to flip the script, quickly started to pile into Gamestop so Melvin Capital would be hit by the huge losses.
The move, also known as a ‘short squeeze’, meant GameStop’s shares surged from just over $17 at the beginning of the year to almost $150 by end of trading on Tuesday, January 26.
Yesterday, its share price soared another 120%, pushing the company’s market value to a whopping $23 billion, as per Bloomberg.
Deutsche Bank strategist Jim Reid said more GameStop shares traded by value yesterday than either Tesla or Apple, companies that dwarf GameStop by market value. As per Reuters, he said the change shows that people have the ‘collective power to make any equity the most traded in the world on any day if it’s in their sights’.
US Senator Elizabeth Warren said the surge was a wakeup call for regulators of Wall Street.
‘For years, the same hedge funds, private equity firms, and wealthy investors dismayed by the GameStop trades have treated the stock market like their own personal casino while everyone else pays the price,’ Warren said on Twitter.
‘It’s long past time for the SEC and other financial regulators to wake up and do their jobs,’ she said.
One technology investor, Chamath Palihapitiy,a told CNBC, ‘We are moving to a world where ordinary folk have the same access as professionals and can come to the same conclusion or maybe the opposite. The solution is more transparency on the institutional side, not less access for retail.’
The market turmoil has even captured the attention of Elon Musk, who encouraged the Reddit-based traders by tweeting ‘Gamestonk!!’ and linking to the traders’ forum.
It also sparked concern from the White House, with Press Secretary Jen Psaki saying President Joe Biden’s economic team is ‘monitoring the situation’.
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