Over the past month, a real war has broken out between EU casino users that accept UK players no deposit bonus of the WallStreetBets community with Reddit and the Wall Street giants. GameStop’s shares more than doubled in price in just one day on January 27, from $ 147 to $ 347. At the same time, back in early November 2020, they were trading at about $ 10 per share. We will tell you casino not on GameStop why this happened and how the company, little-known to the general reader, was heard by the entire financial community.
The deals with the company GameStop?
The American chain of stores GameStop sells game consoles, discs with video games, movies, etc. products. And this is, in a sense, a dying format. After all, discs are losing their relevance more and more – gamers on PCs download content through game launchers, and giants like Microsoft and PlayStation release consoles without a drive for reading discs. GameStop stock has been steadily declining in value over the past six years. According to Bloomberg, over the past couple of years, network sales have fallen by 40%, plus agency analysts expect the company to announce losses in 2021-2022. CNBC noted that GameStop has long been a popular target for Wall Street short-sellers.
What is short trading?
In short, there are two ways to make money EU casinos that accept UK players no deposit on stocks, explains the London Exchange. The first is to buy to sell later at a higher price. Such operations are called long (from the English long – “long, long”), and they are calculated on the fact that the asset will rise in price. The second is a short-term transaction to capitalize on the decline in the asset’s value. In essence, this is the sale of securities that you do not have. This is called a short (from English short – “short, short”). That is, if a trader thinks that shares will fall in price, he borrows them from a broker, sells them on the stock exchange, and waits for a fall. Then he buys out the securities that have fallen in price and returns them to the broker. If a fall occurs, the investor receives the difference between the sale and repurchase prices. But if the shares, on the contrary, grow in price, then the trader will be forced to buy them at a much higher price, thereby losing money.
So what happened to Game Stop?
The unexpected and then still weak growth in the value of the company’s shares began around the end of November 2020 with posts on the wallstreetbets community of the social network Reddit. In them, users accused hedge funds of betting on short positions in GameStop shares, they say, they are drowning the company. As a result, these amateur investors decided to start buying up the company’s shares to “take” money from the funds. At first, they began to short even more actively in the expectation that amateurs would sell off shares UK casinos not with GameStop after a while and the price would still fall. But the latter did not give up. Plus, over time, professional traders joined them and started playing long. Ryan Cohen joined GameStop’s board of directors on January 11, 2021. And the news about the prospects for the digital transformation of the company provoked another rise in the price of the company’s shares.
On January 20, managing partner Citron Research criticized the rise in GameStop shares, citing five reasons why they should be worth less than $ 20. This caused a surge of discontent among private investors and, as a result, another growth by January 21. As a result, the founder of Citron Research Andrew the Left said that “the fact that Citron has experienced in the last 48 hours, it is a shameful and sad indicator of the investment community. We will no longer comment on GameStop is not because they do not believe in our investment analysts, and therefore, that the angry mob that owns these shares has spent the last 48 hours committing many crimes that we will report to the FBI, SEC, and other government agencies. ” After the action, they shot up twice more (just on January 27) – after the post of Elon Musk on Twitter with the word Gamestonk. This is a reference to the stock exchange meme Stonks.
This is how the Internet makes fun of investors and entrepreneurs who make “great” investments in the hope of making money but do not understand the economy at all. The bottom line: GameStop has skyrocketed in value by hundreds of percent in four months. But the short sellers of its shares, according to the company S3 on January 25, lost about $ 6 billion.
How do the authorities and the market react?
The White House said it was monitoring the situation, and the US Securities and Exchange Commission (SEC) is doing the same. Against this background, many brokers began to restrict, and the Robinhood application (a popular English-language online application that allows you to trade on the stock exchange without commissions) completely banned its users on January 28 from trading in the shares of GameStop, the AMC cinema network and almost a dozen other companies that investors on Reddit have dispersed hundreds of percent lately. The company attributed its action to the risk of rising market volatility.
After that, GameStop’s share price went down, ending January 28 at $ 193. Such decisions drew sharp criticism on the Web: users are sure that this once again proves that “mere mortals” are not allowed to beat Wall Street, but the actions of professional financiers of the exchange and regulators turn a blind eye. As a result, a group of investors even filed a lawsuit against Robinhood. The head of the Nasdaq exchange, Adena Friedman, urged regulators to study whether the market is being manipulated. Following columnist edition, MarketWatch said that the situation is not funny and, in general, is as old as speculators skim the cream from the market manipulation.
What to expect next?
During the pandemic, the stock market faced an influx of small retail investors. By some estimates, they account for up to 25% of US stock trading, making them a notable strength. And this new “army of traders is not focused on valuations, but rather on the impulse opportunities they see on social media like wallstreetbets , YouTube, TikTok or Robinhood,” one Financial Times analyst noted. On the Web, they are vying with each other that the prevailing foundations and rules of Wall Street have come to an end.
According to Bloomberg, analysts’ opinions on what is happening differ: some believe that this is just a game played by non uk casino accepting UK players of the Internet community, others believe that this is a way of protesting against established economic institutions. At the same time, the ” Reddit effect ” was not limited to GameStop alone. For example, on January 27, Nokia, which was once among the leaders in the smartphone market, but has long lost its influence, rose in price by almost 40%. Other companies, whose shares suddenly rose in price, also fell victim to Reddit, according to the BCS investment company. As for GameStop itself, analysts expect quotes to return to a fairer level sooner or later. On January 25, Telsey Advisory Group downgraded GameStop’s stock and warned that there was no link between the company’s current market valuation and its fundamentals. “We view the current share price and valuation levels as unacceptable and expect the shares to return to a more normal and fair value driven by fundamental factors,” the analysts added.
Some investors point out that what is happening now “must-have legal and regulatory implications. It is natural, insane, and dangerous.” The fears of large funds are understandable: the huge growth is caused by impulsive decisions of investors, and not by the fundamentals of the company. It is difficult to predict how long retail buyers who act despite funds will hold out, BCS noted. And due to the high speculative component, the price can either continue its impulsive growth or sharply adjust.
Outcomes
But what the story with GameStop has confirmed non-uk licensed online casinos is that forums and social networks can increasingly influence price movements in the stock markets, and fundamental investors will have to take this into account.
