In January we experienced one of the craziest stock market moments of the last decade. GameStop Corporate (GME), an early 2000s company that resembles Blockbuster, was targeted by online investors short squeezing hundreds of hedge funds. The company was being shorted 140%, meaning that there were more stocks shorted than stocks available.
Shorting a stock is when you borrow a stock from a brokerage and sell it, with the promise to give another piece of stock back to the brokerage at the current market price. So companies were shorting millions of shares and selling them hoping the price would go down to then make money.
Online investors realized this and decided to squeeze them by raising the price from $200 to an all high of $469 in a span of 2 weeks. This means that all these companies that sold their stock at $20 per share would have to buy each one back at $469 per share. They would lose billions of dollars.
As seen time after time in our societies, the big guys don’t like to lose so they decided to limit the trading of GameStop stock on these trading platforms illegally. This leads us to Vlad Tenev, the owner of the largest online trading platform, Robinhood, and his run-in with the court. Nothing much came from the court hearing, but what really has been shown in the last month is that these large and old hedge funds can’t be too careful now that anyone with a phone can trade all day.
When Robinhood restricted trading on GameStop, there was outrage amongst tons of day traders since they were not allowed to keep driving up the price and this halt caused the stock price to plummet down to $45, which is its current value.
Time and time again ,Wall Street shows that they won’t let the little guys win at their expense and that truly this system benefits the wealthy.
Categories: World News