Gamestop Stock Up

Paul Navis

Gamestop, a dying company in the eyes of short-sellers, has managed to make the news lately. What began as a social media joke, now has short sellers on edge. Gamestop and the validity of at home stock traders as a whole has impacted the traditional trading among Wall Street.

Modern stock trading occurs in 2 different forms. The Balance describes these as being on the exchange floor and electronically. If done on the floor at the New York Stock Exchange, you will typically imagine something similar to what you see with a busy floor and people yelling. The broker will tell the floor trader that you are looking to buy stock in a company. The floor trader will then find another broker that is selling that stock. The two will bid until there is an agreement on pricing. These prices between the same stock typically have a set price determined by the current availability of the stock. This number is typically computer-generated. Alternatively, this can be done online which is typically quicker since the computer matches a buyer with a typical seller. 

In order to understand what is going on at Gamestop you must understand what a short seller is. According to Investopedia, short-sellers get a stock on loan from an investor. They then sell this stock believing that the price will go down later. They will then buy the stock back and give it to the investor along with typically a cheap fee pocketing the rest of the profit. This can, of course, backfire if the stock goes up.

So what exactly did Gamestop do that was newsworthy? While Gamestop as a company is essentially still in the same place it has been, its stock has skyrocketed by around 8,000% according to NBC News. This was started by a community on Reddit called Wall Street Bets. This community essentially gave the idea to people to buy Gamestop and hold onto the stock to attempt to hurt short-sellers and to “save” Gamestop by investing. Similar bets have also been made on other companies such as AMC, a company incredibly hurt by the pandemic. This hurts short-sellers who now must buy back their stock at a much higher price. Some of these short sellers have even gone into buying more shares of Gamestop pushing the price further up in order to attempt to recuperate losses.

While some of those following this community wish to “save” Gamestop or bring back the idea of investors, others are playing this off as attempting to get back at Wall Street big leagues. Meanwhile, some investing apps such as Robinhood have attempted to stop large-scale trading of Gamestop and other similar shares. Eventually, Gamestop shares will sell as bubbles like this never last forever. No one is sure how stock trading as a whole will be impacted but to start as essentially a Reddit joke, many worries what this could mean for Wall Street.