GameStop shareholders watch as piles of cash come in. But how long?
CNET
Many of today’s young adults have spent their youth in GameStop stores for new consoles, as well as buying and selling used video games. Now some of those people are earning a fortune the share of the company for sale and cheerleading their friends on Reddit buy more of it too.
Although GameStop itself has not changed much in the past month, its share has shot up more than 9,700% – this is not a typo. This dynamic has led to Wall Street investors betting on the company’s future losing billions of dollars, and the excitement is to drive the hype even further.
Over the past week, the financial world has watched in shock as the GameStop share rose to unimaginable levels. On Wednesday afternoon, the stock hovered around $ 325 per share, compared to the historic lows of around $ 3.30 per share in the summer of 2019. Even Elon Musk tweeted about it, pointing his 43 million followers to a link from the Reddit community which invests in GameStop. .
Read more: GameStop’s share was fueled by slang from the WallStreetBets community of Reddit. This is what it means
“We’re seeing a phenomenon I’ve never seen before,” Jim Cramer, a Wall Street commentator on CNBC and a former hedge fund manager, said during a segment on Monday. And GameStop may just be the beginning. “It’s insane.”
It may seem like a strange story about Wall Street investors being overwhelmed by excited users on social media. For some, it was nice to see investors being brought to the cleaners by a bunch of people posting rocket emojis and saying GameStop shares will ‘go to the moon’.
Reddit users bet they can take GameStop shares “to the moon”.
Getty Images
But for some on Wall Street, it’s the latest sign of how social media can improve everyday life. Twitter has changed the world of news and politics. YouTube and Instagram have transformed the fashion, beauty and entertainment industry. Now Reddit tackles Wall Street.
These worlds also overlapped. Fans of Korean pop groups, known as K-pop stanzas, are posting floods of tweets about their favorite stars to overwhelm racist hashtags on Twitter. And TikTokers has teamed up in efforts to confuse President Donald Trump’s re-election campaign.
Now courageous Reddit communities are talking about adopting other companies against which Wall Street in general is betting. The Reddit crowd is already trying to chase BlackBerry, the once popular device maker, which now focuses primarily on selling business software. And Redditors is also targeting the struggling film chain AMC, which is driving shares from $ 2 per share to more than $ 8 in after-hours trading. By Wednesday, it was about $ 17 a share.
The actions of the Reddit community have had such an impact that TD Ameritrade has taken the extraordinary step restrict the trading of shares on Game Stop and AMC shares, “out of an abundance of caution amid unprecedented market conditions.” Nasdaq has also warned that it will stop trading in stocks that it says are being manipulated by social media.
Meanwhile, traffic to the Reddit community in the middle of the drama, WallStreetBets, is breaking records. According to a Mashable report, WallStreetBets counted 73 million pages for the discussion boards on Tuesday. In the past week, it has viewed approximately 700 million pages. According to comScore, Reddit is already the 46th most popular website on the web, with more than 78 million unique visitors in December.
But if the memes stop and the excitement disappears, GameStop will return to the struggling video game retailer at a time when games are increasingly moving to streaming and the idea of stepping into a physical store is still a nerve-wracking prospect during a pandemic. . At that point, stock analysts, whoever the stock remains, will see its value evaporate.
“It’s unnatural, insane and dangerous,” said Michael Burry, a prominent investor in GameStop and one of the subjects of the book and film. The big short, wrote in a now-deleted tweet. Its $ 17 million investment in the company rose to $ 250 million from Tuesday, Markets Insider reported.
Many gamers spent their childhoods at GameStop.
Getty Images
Who is listening?
Michael Pachter, a longtime analyst of the video game industry at Wedbush Securities, said he has not even bothered to update his share price expectations for GameStop since shares went crazy last week. “Who is listening?” he said. “Nobody cares what an analyst on the sales side says right now.”
For him, there are reasonable explanations why people might be somewhat excited about GameStop. One of its newest board members, Ryan Cohen, helped turn Chewey into one of the largest online pet sellers in the world, before selling it to PetSmart. GameStop is also on the verge of being profitable again.
But that does not come close to declaring GameStop’s share price. “It’s a Ponzi scheme,” Pachter said, referring to a form of fraud that appears to make money but is actually only funded by new investors. “There’s a point where it will drop.”
He suspects this could happen after the company reported its quarterly results in March, allowing executives and investors on the board to sell their shares.
Meanwhile, the social media hype continues on Reddit, where users declare their intention to buy and hold more GameStop shares, all to make prices rise even higher.
“My mom told me it’s time to sell,” one Reddit user wrote in a post about GameStop’s shares. “Should I get a new mom?”
“Yes,” replied another user. “The answer is yes.”
See also: Why GameStop, BlackBerry shares suddenly jumped, thanks to Reddit