![]() When Elon Musk tweeted “Gamestonks” and linked to the Wallstreetbets forum, the share price jumped about 150 per cent in after-hours trade (although there are suggestions the timing of the rise was a coincidence). Stonk is essentially a way to say “stock” on the internet. Why is the word ‘stonk’ surfacing and how is Elon Musk invloved? Instead of billions, however, Burry looks like he may have made about 100 million on. As the share price rose and rose, more people bought in – both to trigger the short squeeze, and because the price itself was now a way to make money.ĪLSO READ | Facebook Shuts Popular Stock Trading Group Amid GameStop Frenzy At GameStop’s Reddit-fueled high of 483, Burry’s maximum holding could have been worth over 1.5 billion. GameStop’s low share price made it relatively easy for a large number of people to buy in with little money. This leads to a sharp rise in demand for the share, and huge rally in share prices.Ī series of users on the Reddit forum ‘Wallstreetbets’ noticed that GameStop was undervalued by the market and vulnerable to a short squeeze. Short squeeze is a term used by market participants to refer to a phenomenon where short sellers in a stock who have placed their bets on a stock’s fall, rush to hedge their positions or buy the stock in the event of an adverse price movement, in order to cover their losses. ![]() GameStop, before the frenzy, was one of the most shorted shares on the US market, as a range of funds bet that it would slump during the pandemic. The group members decided to use the most lethal weapon that one can use against short sellers – the ‘short squeeze’.ĪLSO READ | GameStop Memes Surge on Internet as Freakish Stock Rise by Reddit Baffles Wall StreetĮssentially, on the stock market, you can bet on a share price falling rather than rising, by “borrowing” shares and selling them at the current price, with the obligation to buy them at a later date, at whatever price they have then reached. They had no idea that an online group on Reddit, where members exchange tips and stock ideas would put a spanner in their plan and the wound would be so deep that they would end up staring at bankruptcy. In the case of GameStop, the hedge funds had played their cards and were waiting for the shares to fall and make a killing. Incidentally, the Indian markets also offer the ‘Stock Lending and Borrowing’ mechanism, or SLB, for better managing the settlement of short selling trades. Short selling is a widely accepted practice and is allowed in most of the markets across geographies. Short selling or short sellers are those who borrow shares and sell while hoping the price would fall further so they will be able to buy the shares at a lower price and return the shares to the lender. These funds are known to target stocks that they feel are overvalued by going short on the shares. It all started when well-known hedge funds like Melvin Capital and Citron Research got interested in GameStock shares. Shares of GameStop have surged from $19 on December 31, 2020, to $197.84 on January 27 – a gain of nearly 1,900 per cent. A number of high-profile hedge funds have already lost more than $5 billion so far this month, according to data from the financial-analytics firm S3 Partners.GameStop may well be a nondescript struggling chain of video game retail stores in the US, but if its stock price is anything to go by, then it is definitely more in demand than the hugely popular Facebook, Apple, Amazon, Netflix and Google group of stocks that has even made Indians look at the US stock market for investment opportunities. ![]() ![]() The higher the stock went, the greater the losses incurred by those that had previously bet against any price rises, as they were then forced to buy those shares back, whatever the cost. Members have spent the past three weeks bidding up GameStop, which has sent the shares skyrocketed more than 1,200% since Wall Street Bets first piled in on January 11. GameStop's shares have hit record highs and the swarm of retail investors behind the rally have cheered each other on, primarily within the popular Reddit forum Wall Street Bets, which by Thursday, had around 3.5 million members. Video-game retailer GameStop has dominated the headlines this week after its shares trebled in value in just three days this week, in a buying frenzy fueled by individual traders that have forced some of Wall Street's prominent hedge funds to close their bearish bets against the company with hefty losses. ![]()
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