Young, Online Traders And Investors Put The Shock Into Wall Street With GameStop Stock Price
PITTSBURGH (KDKA) – A major spike in certain stocks left Wall Street and at-home investors buzzing and it all started with an online call to action.
It’s a battle between traditional Wall Street investors and a new breed of investors, many of them younger, who are at home and have gotten into trading online.
Boiled down, traditional investors looked at GameStop and felt it was overvalued. So – betting against the company, they started selling the company short, meaning if the stock dropped, they made money.
However, Reddit and its trading arm, “Wall Street Bets” kind of the source for the at-home crowd saw the bets against Gamestop and told its followers if we invest in GameStop, we can drive up the stock price and stick it to those selling it short.
In other words – traditional investors will lose a lot of money.
That’s exactly what ended up happening. The price of GameStop was driven up 10,000%.
At the beginning of the year, GameStop stock was $17.25/share. Yesterday, it closed at $347.51, although it’s dropped a bit in after-hours trading.
Wall Street Bets didn’t stop there – they’ve done the same thing with AMC and BlackBerry.
This is almost a generational war with millions of dollars on the line.
WATCH: Interview with Michael Godwin, CIO of Financial Advisors
“As long as this mania that we see stays in certain heavily shorted names like Gamestop, AMC, Tootsie Roll is another one,” said Michael Godwin, the Chief Investment Officer at Financial Advisors. “As long as it stays isolated to those heavily shorted stocks we think that uh, that is a good thing. If it spills out to the broader market, that’s when I’d become a little more worried about the stock market in general.”
The fact is, there are big dollars to be made with you can ride the swell, but it’s dangerous – you could lose a lot as well if you don’t time your sale just right.
It’s not just young at-home investors driving the prices up, it’s also big names getting involved like the owner of Tesla, Elon Musk, who tweeted about it, promoting yesterday’s spike.
This is beginning to be characterized as “insane” and in some circles, it’s being compared to a Ponzi scheme.
However, there is nothing illegal about what is happening.