What Actually Happened With Gamestop


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Sophia Randazzo

The internet has erupted into waves of memes, jokes, and articles over the stock market issue currently at hand. Hundreds of words have been thrown around: hedge funds, Gamestop, Robinhood, and stock, to name a few. Now we may all nod and laugh at the memes and pretend to understand what they mean, but in reality the stock market is a confusing place, so let’s break it down. 

This past week, Gamestop has risen to fame for something ironic in its own situation; Gamestop has grown famous for going out of business. Over the years, as gaming has shifted from DVD and physical software to online downloads on companies like Xbox and PS4, Gamestock’s once valuable stock has depreciated. In the stock market world, bets are taken on who will prosper and who will fail. People bet on those that will fail in a process called shorting a stock–they borrow stock at a low price from the depreciating business, sell it to others to make it more valuable, buy it back, and then sell it to the original business at a higher price hoping to profit from the ordeal. They basically gamble on the stock losing value so that the company will have no choice but to buy it back from them. During Gamestop’s slow fall toward bankruptcy these short stockers rushed to buy pieces of the stock, hoping to earn money by forcing the company to rebuy the stock. However, thanks to a few handy Reddit users who wanted to root for an underdog and help Gamestop’s stock value rise, a movement was started that rallied users to buy small pieces of the company’s stock. This movement expanded, and ended up appreciating stock prices so much that it created a national shock. Jumping from around 19 USD (United States Dollars) to 347 USD over the course of a week, the fluctuating price in stock sent waves through the stock market. Short stockers rushed to try and sell their stock, but ultimately bet on the wrong company’s downfall and ended up losing a lot of their investment. 

Differing opinions have arisen over this controversial topic. Long term stockbrokers and others that deal in the stock market industry have called this event a lucky chance, and are somewhat angered by this loss of investment. Others in this industry speculate whether the Reddit movement was legal. For context, insider trading is an illegal action that is prohibited in the stock market world where information about a certain company’s stocks cannot be revealed due to the privacy contracts of other companies. These speculators believe that a stockbroker may have been behind the Reddit movement, which would be considered insider trading and therefore illegal. On the other hand, some believe that this was a powerful movement, finally shifting the balance from the top percent of people who happen to be educated enough to understand the stock market to the middle class/average consumer who took a chance. 

Differing opinions aside, it is obvious to see that this was a last chance attempt to save Gamestop, but it may not prevail as Gamestop stock prices have once again dropped to around 50 USD. The truth is that as technology shifts from physical to digital, things must adapt. This may give Gamestop a chance to revive its own company. Despite how murky the rules of the stock market may appear at first glance, this event has shown the American people that things are anything but stagnant in this unique model of entrepreneurship.

Vocabulary Words:

Stock: the shares into which ownership of a corporation is divided

Depreciate: to lose value in price

Appreciate: to gain value in price

Insider Trading: the illegal practice of trading on the stock exchange to one’s own advantage through having access to confidential information

Shorting stock: opening a position by borrowing shares that they don’t own and then selling them to another investor, while believing that the price will go down

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