What Happened With GameStop (GME) Stocks? Here’s What You Should Know
You've seen the memes on social media. One day, everyone started talking about stocks and GameStop. But what exactly happened on Wall Street last week? It's a classic power struggle: the big corporation against the little guy. Here's what you need to know about GameStop, the stock market news, and how you can make sure you're on the right side.
Poor People Get Poorer While Wall Street Takes Advantage
The COVID-19 pandemic has caused financial suffering for most people. Unemployment rates are skyrocketing. People are struggling to pay their rent. Crowdsourcing is a top source for health coverage. Many people have found themselves in dire circumstances.
Businesses have struggled, too, particularly businesses like GameStop and other retail stores. But Wall Street hedge fund managers, who are already rich, found a way to take advantage of this struggle: they bet against GameStop. Those bets seemed like a sure thing, and as long as GameStop kept suffering, the hedge funds would keep gaining money.
It probably seemed like an easy way to make money off of the pandemic, even as most people continued to struggle. (In fact, they counted on other people struggling for this process to work.) However, thanks to savvy amateur investors, that plan didn't quite work out the way they were expecting.
What Happened With GameStop?
It started with a Reddit thread. These days, amateur investors have started taking up space in the stock market. Thanks to the internet, apps, and similar resources, amateur investors have built communities around stocks. These communities monitor the stock market, including hedge funds, and they noticed how hedge funds were short-selling GameStop.
Amateurs started buying GameStop shares at low prices, and through the Reddit investment community, they encouraged others to do the same. GameStop shares started selling at a rapid pace, and the price of those shares went up fast.
Remember how those hedge fund bets seemed like such a sure thing? Last week, hedge fund managers learned not to underestimate internet communities. By short-selling GameStop, those hedge funds should have made tons of money. Instead, they lost billions. For once, average people and struggling businesses started gaining money.
Robinhood's Name Becomes Ironic
Obviously, these hedge fund managers weren't exactly thrilled to see regular people take advantage of this system - never mind that they themselves had taken advantage of the same system for decades. Wealthy Wall Street traders can't stand a level playing field; they'd prefer to keep themselves at the top, even if other people have to suffer in the process.
And that's where apps like Robinhood come in. Robinhood is an app marketed toward amateur investors. Many amateur investors use Robinhood and similar trading apps. These apps are approachable, they let users learn as they go, and they allow small investments. A lot of investors used Robinhood to purchase their GameStop stocks.
That is, they used it until the buy ban. Robinhood, TD Ameritrade, and others have blocked average buyers from purchasing GameStop and similar retail shares. At least temporarily, users could sell, but they couldn't buy.
In other words, Robinhood sided with the rich against the poor, which is extraordinarily ironic given their namesake.
Who's On Your Side?
Corporations will always support corporations. For regular people to take advantage of their buying power, they need the support of other regular people. The hedge fund managers of the world aren't on your side. Small business owners, community bank managers, and nonprofit organizers are.
If you're ready to start investing with real people, look for those who really want to help. How? We'll help you get started. Take a look at Bundlefi to connect with local banks, credit unions, and other small financial institutions. Invest in your community.