GameStop nearly died in 2019. Now, hedge funds are scrambling to deal with the company's exploding stock. Here's what's going on.
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Carlo Allegri/ReutersThe world's largest video game retailer has had a wild few years.As recently as this past summer, its stock value was in the gutter: Below $5 per share as of mid-August.Things started looking better in the second half of 2020 as game consoles launched, but the stock has exploded in recent weeks.
It turns out that explosion has nothing to do with video games, GameStop, or the video game market.In early 2019, GameStop's stock value fell off a cliff: It dropped from about $16 per share to under $4.Andit stayed in that range for just shy of two years
. Even in 2020, while the video game business (including GameStop) saw huge gains due to coronavirus lockdowns, GameStop's stock price remained in the gutter. As recently as late August — just under five months ago — the world's largest video game retail chain had a stock value of less than $5 per share. headtopics.com
But in the second half of 2020, with big financial names like Michael Burry and Ryan Cohen buying up shares in the ailing retailer, things started looking up. The company's share value gradually increased, until it outright surpassed its pre-collapse value in late 2020.
And that's when it gotreallyweird: Between January 20 and January 26, GameStop's stock value leapt from just over $35 per share to north of $140 per share. By January 27, it hit new all-time highs of over $325 per share — an over 8,000% increase from just a few months ago.
The last month of GameStop's stock value movement demonstrates how much it has shot up in value.GoogleBut why?The answer has little to do with GameStop, nothing to do with video games, and everything to do witha Reddit forum dedicated to playing the stock market
.The forum, named "Wall Street Bets," has over 2 million members, and its the collective action of those members that's driving up the value of GameStop's stock. Simply put: As more people buy the stock, its price increases. And there's no signs of that collective action stopping anytime soon. headtopics.com
"GME has bounced and is once again at $225," one thread in the Reddit forum said on Wednesday morning. "Hold strong boys ... we will take GME to $1,000," the post read. Another threadurged users not to sell, and to remove their $1,000 price limit which would automatically trigger sales. "GME will stay going until WE sell. Do not f---ing sell boys, $1,000 was the original target but nothing is stopping this from getting to $5,000 but us. It sounds like a meme but it isn't. Hold on tight and make father Musk proud!"
More than anything else, the prevailing theme in Wall Street Bets is collective power — enough collective power to push back on the hedge funds and analysts that predicted GameStop's stock would never reach such heights. Read more: Business Insider »
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Here is going on in reality 👇🏻 The fairytale stock. thanks for this news What's happening to the kid in the blue jacket though? 🤔 I would sell this stock right now if u had it 👏