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Gme, Amc, and the Hypocrisy of Wall Street

Atticus is a self renowned gamer, actor and lover of horror. How will he intertwine that into one career? Who knows.

Is GameStop Really the Secret for Moneymaking in 2021?

GameStop stocks are at a record high after a planned short squeeze

GameStop stocks are at a record high after a planned short squeeze

Short answer is yes, if you were early.

If you've looked at your phone or a device that displays the news in some capacity, you've probably read something about what's going on in the stock market right now. If not though, allow me to summarize. In late 2019 a Reddit user decided to buy $50,000 worth of GameStop stock when it was at a record low, and decided to hold onto it even after many instances of controversy, and no real hopes of revival especially once the pandemic hit. After learning though that GameStop was being shorted by two major hedge funds, the user coordinated a short squeeze using a subreddit called r/wallstreetbets. The short squeeze multiplied the stock price 190 times, its record at $500 a share. A short squeeze happens when a stock price goes up higher than an estimated amount and the traders who bet the price would fall are forced to sell so as to not lose more money. So when Reddit users realized GameStop was being heavily underfunded, they knew they could drive up the price by having thousands of people buy large amounts of stock. The Reddit user that invested the most at the earliest possible time is now sitting on a cool $53 million. So what does this mean for you? What does this mean for Wall Street?

Repercussions of Short Squeezing

So what happens now? Are people selling or holding? Well, this is why this game of cat and mouse becomes a bit dangerous. The more people hold, the more the hedge fund investors start to sweat because they have to come up with more and more money as time goes on. On the other hand however, people could see $700 as being the absolute cap for GME, and they start to sell. If that happens, the price goes back down and while the 1% investors are still losing millions, the majority of folks can end up losing money besides the ones that decided to sell high. So at the end of the day, while this can be extremely profitable, it's also a way to lose hundreds if not thousands if you don't act with care.

Can Anything Be Short Squeezed?

Reddit users hold all the power now

Reddit users hold all the power now

Other Stocks and the Response of Wall Street

GameStop is not the only shorted stock that internet users globally are hoping to manipulate. AMC, Bed Bath and Beyond and Nokia to name a few, are planning to be squeezed on January 29th of 2021, and only time will tell if this attempt works out in the masses favor. Robinhood, which plays a heavy role in this as they are a regulated broker dealer, has been under fire for restricting buying access of volatile stocks such as GameStop, and has even raised over 1 billion dollars to cover the capital required to offer trading. Three U.S lawmakers have called for an investigation to look into Robinhood's actions, and a number of lawsuits have already been filed in New York's and Illinois' federal courts.

The Connection Between GME, Wall Street and Us.

Melvin Capital played the largest role in this entire debacle, as they instigated the squeeze by short selling GameStop to the point of no return. With Reddit denying the deletion of GameStop's financial existence, Melvin Capital was left extremely vulnerable, so obviously they had to dig themselves out of a quickly closing grave. Point72 Asset Management and Citadel saved the day by investing $2.75 billion so they could have an easier time covering their losses. According to a report from June of 2019, $39 million dollars worth of Robinhood's revenues came from Citadel Securities, a sister company to Citadel. At the time, this was 35% of Robinhood's revenue. In short, Citadel is one of Robinhood's biggest customers, so when they see they're getting shorted because Redditors don't want their favorite/hated gaming store to be crushed, Robinhood makes it difficult to buy the stock. Ironic, isn't it? Kind of reminds you of the good old 2007 days, when Wall Street bankers gambled away the nearly the entirety of the American Economy.

Diagram of Short Selling

Hold the line everybody!

Hold the line everybody!