Wall Street has been revolutionized for days by the phenomenon GameStop, a popular chain of video game and electronics stores whose shares lead to daily increases of around 50%. The apparent troleo from a subgroup on Reddit called WallStreetBets It seems to be behind the operation that is shaking the orthodoxy of the American park, although the case is more complex.
The story goes back a while. GameStop’s business model was based on stores and physical formats that digitization and lockdowns had led to a tightrope. His actions last March came to mark $ 3.5 minimum, nothing to do with 148 dollars in which they ended the session on Tuesday after a new and meteoric rise.
Between one situation and another there are two names. The first is Ryan Cohen, the founder of the online pet food store Chewy.com, who at GameStop’s worst moment acquired a large number of shares and put pressure on its administrators to try to revive the business and bet on digitization.
The former leadership of GameStop took up the challenge and brought in Cohen to carry it out. The results began to be reflected in a matter of months and the shares rose from the March lows to $ 17.25 at the end of 2020.
Only Cohen and a few others trusted the recovery. On the contrary, much of traders, hedge funds and more risky investors adopted bearish strategies and bet on the fall in value. However, when the situation turned around and stocks began to soar, those same investors were caught in a vicious cycle to avoid losses and their reaction was to start buying stocks at increasingly higher prices to cover their short positions.
Added to the fears of these shareholders is the confrontation on social networks between the bears themselves.
WallStreetBets
Now is when we must present the second of the leading names in this story: WallStreetBets. It is a group within the Reddit social network made up of more than two million users which include investors who are engaged, among other things, in betting short. The members of that subgroup organized to launch a virtual offensive against other bassists who have been betting against GameStop for a long time. The offensive is based, broadly speaking, on buying shares in an outrageous way to raise their price and, with it, causing million-dollar losses in those who took short positions to sink the value.
And at this point is now the phenomenon. Experts agree that the movement organized by WallStreetBets has influenced the volatility of these days, although they also consider that it is not the only factor and that it is still too early to say how the virtual contest will end.
At the moment, hardly anyone seems to be on the sidelines. In fact, the very Elon Musk, founder of Tesla, wrote a tweet referring to the situation.
The episode also reinforces the theory of another group of managers who believe that a new bubble inverter to the heat of the speculation by inexperienced investors. His warning was collected a few days ago by the newspaper Financial Times in line with the high valuations that have been established for some time in some indices and in some equities.
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