SPRINGFIELD — The world of stock trading has been turned on its head this week, all because of an organized movement on the social media site called Reddit.
This unprecedented stock market movement pits wall street against an army of everyday traders, with the stock price of longtime video game store GameStop (GME) in the middle of it all.
GameStop, whose stock price per share just two weeks ago sat around $20, closed Wednesday over $347 per share.
How did this happen?
GameStop is currently the most shorted stock on Wall Street by Hedge Funds – meaning they are betting on it to fail.
Word of the shorts made their way to one of the hottest Reddit forums around right now: /r/wallstreetbets
It is with millions of people who discuss the stock market. They all decided to band together and buy as much GameStop stock as possible over the last few weeks to go against the shorts. This movement to go against the hedge fund investors, known as a “short squeeze,” caught fire on the internet.
It drove the price up in a matter of days, costing major hedge fund Melvin Capital what is believed to be billions of dollars.
Ozarksfirst Reporter Jesse Inman spoke to the local Certified Financial Planner, Stephen Evans, about this phenomenon. Evans says it’s highly unusual, and it is something that he hopes doesn’t result in a crackdown or some regulation on retail investors.
“These people aren’t doing anything (wrong). They’re just talking in a forum, and I hope they don’t try to regulate free speech like they’ve openly said what they’re doing. Some of the financial news people are saying we need to regulate the little guy. The big guy does the same thing. He comes in and destroys the company and does stuff (like this). I think the little guy needs to be able to come in and do the same thing – equal opportunity,” says Evans.
Before you get excited and go dump your money blindly into the markets, it is important to know this is a huge risk. Evans says that he would not recommend this to his clients when it comes to this type of trading.
“It’s created this giant bubble. I mean, this is 100% gambling. These people are gambling with their money; they could lose it all. Someone is going to get caught. Someone is going to ride this thing to the top and be like, ‘Oh, I can buy it,’ and buy it, then just watch it die,” Evans explains.
That being said, some people have made thousands – even millions from joining this unprecedented movement and profiting off of GME stock.
The effort has driven up the price of other highly shorted stocks this week as well, such as AMC Entertainment (AMC), Nokia (NOK), Blackberry (BB) and several others.
Evans provides more insight from a financial perspective in his full conversation with Inman in this video below: