In today’s fast-paced and competitive business landscape, startups often find themselves navigating a maze of challenges that can hinder their growth and potential. By January 25th, the stock had jumped to $76.79, and on the 27 th, it was trading higher than TESLA at $347.51. On January 12 th, GameStop was trading at $19.95/ share.
When the subreddit and their legions bought up all the GameStop stock, the price shot through the roof. Enter RedditĪ subreddit group, wallstreetbets caught on to the GameStop short and decided to band together and apply a ‘short squeeze.’ They used their clout to urge amateur investors across the internet to purchase stock in GameStop, declaring a fight against the big Wall Street firms. They borrowed many shares from the company’s shareholders and sold them immediately in anticipation of the price drop. When some big hedge funds eyed the downward trend of GameStop, they decided to short the stock. To return the oranges to Kevin, Max has to spend more money than he made and lose $10 for his efforts. In the case of the oranges – what happens when Max sells the oranges he borrowed from Kevin, and instead of the price dropping later, the price goes up? Now, Max has to spend $3 on an orange. It is perfectly legal and, in fact helps regulate the prices of particular stocks. Short selling is something that happens all the time on the stock market. He then returns the oranges to Kevin, making a cool $10 profit in the process. After a couple of days, the price for oranges drops to $1, so Max goes out and buys 10 oranges for $10. Kevin’s friend Max borrows 10 oranges from Kevin and turns around to sell them all right away for $2 an orange, totaling $20. Suppose Kevin has 100 oranges and the going rate for oranges is $2 apiece. They sell it and repurchase it once the price goes down and keep the profit minus some interest. An investor will borrow the stock of a company from someone when they anticipate a price drop. What is ‘Shorting a Stock’?Ĭontrary to traditional investing, shorting a stock is how traders look to make money off a stock’s failures rather than success. Eagle-eyed investors saw this as a sure-to-fail gambit and moved to short the stock. In September of last year, investor Ryan Cohen bought a 13% stake in the company and pushed them to move their business to an online model. With less people shopping in malls, Xbox and Playstation introducing digital only consoles, and COVID-19 lockdowns, GameStop business was on the decline. It seemed that GameStop was on the downward trend over the last year. They specialize is selling new and used video games and equipment along with some novelty toys and merchandise. GameStop is a video game retail store with over 5,000 stores across the United States.
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