Something happened last week that was truly startling and shocking – a group of Internet users decided they were sick of the powers that be, and that billionaire hedge fund managers should receive a taste of their own medicine.
These people did the unthinkable and flipped Wall Street on its head. As stock trading has become something people can more easily access through apps like Wealthsimple and Robinhood, gathering enough people to pull this off had never been more feasible.
For those who don’t know, GameStop is a North American retail outlet that sells video games and consoles. The company’s stock (GME) had some dramatic dips over the last year, dropping as low as $2.60 per share in March 2020. A number of Wall Street hedge fund firms predicted the company would go bankrupt due to the pandemic and decided to “short” the stock.
In case you haven’t seen The Big Short – a great film, by the way – the concept of shorting a stock is a way of selling something the seller doesn’t own. Traders do this in anticipation of a stock dipping in price, so they can sell back the lent stock at a price that allows them to keep the differential. As there are closure deadlines that have to be met, sellers eventually have to buy back the lent stocks – no matter what happens to the price in that time.
Now, here’s what happened last week: Amateur traders that are part of an online community called Reddit decided that hedge funds profiting on a company’s hardships should face consequences – something that seemed impossible before this occurred. The Redditors collectively bought as much GME stock as they possibly could and held on to it, meaning the price skyrocketed. This caused the hedge fund and Wall Street traders that previously tried to short GME stocks to go bankrupt to lose billions of dollars.
While people aren’t able to hold out forever, and the stock continues to go back down in price, the event may have sparked the beginning of a new age in day trading. For the first time, everyday people were able to control the tides of Wall Street and show the rich they were, for once, not in control.
I was inspired by the events. Not because I hate the rich, but because quite often in life, normal people feel they are powerless when it comes to the ruling class. The day people decided to skyrocket GameStop stock was an awakening for the people who live and breathe the stock market. It is safe to assume the brilliant minds that operate the markets will find a way to avoid this ever happening again, but man, it was quite the sight to see unfold..