There's more of Us and them: An example!
Quote:How GameStop found itself at the center of a groundbreaking battle between Wall Street and small investorsArchived Source:
The video game retailer has become one of the hottest stocks this year in a tale that illustrates the changing face
of investing.
"What the hell does 'Lol' mean?"
'The coronavirus pandemic hit GameStop hard. Like many retailers, already suffering from the shift to online sales,
the video games chain is losing money and plans to close 450 stores this year. And yet, surprisingly, GameStop
has become one the hottest stocks of the year.
The 37-year-old chain store group is now the focus of a David-and-Goliath battle between an army of small investors
and Wall Street that shows no signs of abating and has highlighted some fundamental shifts in investing.
Last April, when the company announced mass closures, GameStop’s shares (GME) could be bought for $3.25 each.
On Tuesday they soared another 92% to end the day at close to $148, pumped up again by small investors hoping to
ruin Wall Street bets that the price would crash. It’s a bet that has, so far, proved very costly for the professional financiers.
The strange saga of GameStop’s cult status can be traced back to last September, when Ryan Cohen – investor and
founder of the online pet food giant Chewy – took a 13% stake in the retailer and started lobbying for it to move more
of its business online and become a serious rival to Amazon. Cohen and two associates were added to the company’s
board in January.
The company’s share price began to soar as small investors snapped up a cheap stock using the trading app Robinhood
and other services, seizing on what they saw as an ideal buying opportunity. Wall Street saw something else – a chance to
“short” an ambitious bet against Amazon they believed was bound to fail.
Shorting a stock is risky. It involves “borrowing” a company’s shares and selling them with the intention of buying them back
cheaper when the share price falls. Many Wall Street fortunes have been made this way, but if the price doesn’t fall, the
losses can be huge.
About 71.66m GameStop shares are currently shorted – worth about $4.66bn. Year-to-date, those bets have cost investors
about $6.12bn, which includes a loss of $2.79bn on Monday. Monday’s stock gain of 145% in less than two hours, which
extends GameStop’s gains for the year to more than 300%, is the latest sign that frenetic trading by individual investors
is leading to outsize stock-market swings. On Tuesday, the party continued. When, and how, it ends is anyone’s guess.
GameStop has been the most actively traded stock by customers of Fidelity Investments in recent sessions, with buy orders
outnumbering sell orders by more than four to one. The volatility prompted the New York stock exchange to briefly halt trading
nine times.
“We broke it. We broke GME [GameStop’s stock market ticker] at open,” one Reddit user wrote on Monday after the NYSE
halted trading. Ihor Dusaniwsky, a managing director at the data analytics company S3 Partners, called the situation “unique”.
Established investors were still betting that the company’s sky-high share price would – eventually – collapse, ignoring earlier
losses “and using any stock borrows that become available to initiate new short positions in hopes of an eventual pullback
from this stratospheric stock price move,” he said.
“Much like the revolutionary war, the first line of troops goes down in a rain of musket fire but is replaced by the troops next
in line,” Dusaniwsky added. The battle has become a war of attrition between a new generation of investors and established,
more diversified players.
Investors on the WallStreetBets subreddit forum have been promoting GameStop aggressively, with many pitching it as a battle
of regular people versus hedge funds and big Wall Street firms. “This is quite the experience for my first month in the stock market.
Holding till infinity,” posted one user on the thread. Another user said: “We’re literally more powerful than the big firms right now.”
In some cases, they’ve been right, with larger investors like Citron Research taking a sharp lesson in what can happen when
“herd investors” squeeze a stock higher.
Citron’s founder, Andrew Left, called GameStop a “failing mall-based retailer” in a report earlier this month and then predicted
that the stock would plunge to $20 in a video he posted to Twitter on Thursday.
According to CNN, Left has now given up on shorting the stock, citing harassment by the stock’s backers...'
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