GameStop is a second-hand video game retailer, which as a brick and mortar store, is a failing business and their stocks have been suffering as a result. Stock shorting, or short selling, is a legitimate tactic used in the stock exchange to betting that a stock will do down or loose value, making money for investors on failing businesses such as GameStop, which allows hedge funds to make huge profits even from trading the stocks of failing businesses.
Robinhood is a stock market brokerage app that has made it easier for casual users to become day traders on the stock exchange, something that has becoming increasingly popular with so many people at home during the COVID pandemic. In January 2021 a group of Reddit users on the ‘WallStreetBets’ forum decided to bet up a variety of stocks, one of which is GameStop, undermining the short selling of big investment hedge fund groups. This resulted in one hedge fund, Melvin Capital, losing 3 billion dollars in one week, and more interestingly resulted in the company that owns the Robinhood app and other hedge funds came to the rescue. Robinhood limited trading on GameStop stocks as their biggest investor effectively bailed Melvin Capital out.
Essentially negative sentiment from Wall Street is butting up against the positive investor sentiment from Reddit users, and this has caused a political storm following the Robinhood app blocking certain trading transactions, which undermined these smaller individual investors. Some are crying foul of stock market trading app users, calling for more regulation of such services, while others are criticising Robinhood for favouring large hedge funds or for manipulating the market in their favour. So, what conclusion should we draw from the GameStop scandal?
Stats of Viewpoints
Evidence of insider trading
Political implications – conflict of interest
Reveals the true nature of the stock exchange
Overblown – just people trying to make money
At risk from anti-capitalist movements
Susceptible to financial "shitposting"
This is the real occupy wall street