Imagine a company whose stock price was $4 one year ago but reached a whopping $330. This company’s name is GameStop. It is a retail company that sells video games, consumer electronics, and gaming merchandise. Now, this isn't new because, in 2008, even Volkswagen’s stock had faced a short squeeze. So lets us find out all about GameStop and its journey here at Truly Global.
When GameStop’s price fell to $4 in March 2020 many large hedge funds, private equity, and investors like FMR LLC, BLACKROCK INC, VANGUARD GROUP INC, SENVEST MANAGEMENT, etc. thought that that company would go bust and started shorting the stock. But things turned for GameStop when
RC Venture acquired 13% of GameStop.
The release of a new PlayStation in November 2020 helped boost its stock price as seen in the past.
Gamestop made a deal with Microsoft, stating that Microsoft will give GameStop a share of Xbox's digital revenue.
These three things soared up the price of the company’s stock, and to recover the losses, investors shorted even more stocks, and these number of shorted stocks grew to 71 million, more than the number of stocks available in the market. Now, this is where the crazy Reddit group kicks in because they had realised that there is high demand and less supply of stocks. So if they bought the stocks and held it then the prices would soar up even more. Hence a short squeeze happened and Reddit guys won big while investors who had shorted the stocks lost a lot. For example, a big institution like Melvin Capital had to be bailed out by other large institutions.
So this was the crazy journey of GameStop. But we don't know if the short squeeze is over because there are still some stocks left and we do not know how this whole thing is going to turn out. Now the newspapers say crazy Reddit guys ruined the market, but we think that this is nothing different because the large hedge funds who used to sway the market got swayed by a few guys on internet in other words they got a taste of their own medicine. What do you guys think, let us know in the comments below, and if you like our work do not forget to like and share.
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