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"I'm an old millennial": Reddit users invaded the stock exchange

Thursday, January 28, 2021

Startup Jedi

We talk to startups and investors, you get the value.

The last few days in the stock market are full of the news on GameStop (NYSE: GME) shares. The company sells physical media containing games, films, consoles and other goods. For the last two years, sales have only been falling, and analysts have not seen any options in which shares will start to jump, it was the leader in falling rates. But in the past two months, shares opened up 360% and market capitalization has tripled.

The starting point of the events was a post on the Reddit portal, in which the u/ronoron user, a member of the Wall Street Bets community, emotionally noted the bet on short positions (an investor opens a short position in the hope of profit from a fall in market quotes — Startup Jedi) of GME hedge employees of Melvin Capital fund. His text caused a wave of indignation among users, and then everything developed rapidly.

Users began buying shares of the gaming company in order to “take money from greedy hedge fund managers.” In mid-January, Ryan Cohen joined GameStop’s board of directors, supporting the development of the company’s online store, and amid the news of his appointment, the company’s shares are getting more expensive. As a result, in the last few days alone, the value of securities jumped 110%. The 51% jump was boosted by Citron Research’s announcement that it will stop commenting on GameStop’s shares until the “angry crowd” that they claim has carried out multiple attacks on their accounts would calm down.

On January 26, Elon Musk commented on this situation on Twitter — in one word “Gamestonk”, combining the meme about dubious investments “Stonk” and the name of the company.

Also, three days ago in morning trading, GameStop shares jumped 144.9% and reached their maximum. At the same time, the losses of investment companies have reached billions of dollars.

The event mixed several important cultural conflicts. In the comments to the first post, Reddit users talk a lot about the difference between generations: the fall of GameStop is called the result of “boomer” decisions of managers and managers of hedge funds. Also, emotional comments mention the conflict of US political parties and anger at the elite part of society. “I’m an old millennial. I’m tired of being deceived by the global elites. They are not left or right, Republicans or Democrats. This is 1% against all the others, “- notes the author of one of the most popular comments on the thread.

The Robinhood platform, which allows retail and individual investors to trade stocks, played an important role in the development of the situation around GameStop. According to the CEO of the platform, such market players have a feeling that no one takes them seriously and does not take them into account. And that was practically a matter of principle.

Analysts predict the possibility of a similar “war” against bitcoin. This story reminds us once again that it is impossible to foresee all factors in complex investment systems.

UPD

Events continue to unfold every hour. To date, Robinhood has limited the ability to invest in GameStop, for which users immediately lowered the app’s rating to one. Also, investors did not keep waiting for a response — they filed a class action lawsuit against the platform.

28 Jan 2021

 

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