Some thoughts on Game Stop and this week
If you somehow missed this story (which would have been very hard to do) let me give you the quick backstory. The stock of Gamestop ($GME) became the popular target of a Reddit thread known as r/wallstreetbets. Essentially a large number of retail investors through apps like Robin Hood came out in droves buying shares and pushing the stock higher. The back theory was that since Gamestop was so heavily shorted by the hedge funds, pumping the stock price would force a short squeeze, force the hedge funds to buy additional shares to cover their short bet, thereby increasing the price even higher. Well it worked, until it didn’t. Multiple times on Thursday Robin Hood and Interactive Brokers halted sales of the stocks thereby allowing the free fall to happen. At 10am GME was trading at approximately $468 per share, at 11:18 it was at approximately $126. Here are some of my thoughts:
I want to be very clear, if you think you can make some money on these apps, that’s not my job to stop you. I love to see new people getting into investing and having a better understanding of how markets work. But remember just because something has 28,000 upvotes on Reddit doesn’t mean it’s going to be fool proof. Sometimes, the roulette table lands on red.