There are two guarantees in 21st century America: The internet is a wicked beast, and the stock market is its own wild breed of animal. When those two creatures come together, the thing that comes out is worthy of mythology and stories told for years.
So, what happened? Investors, hedge funds specifically, were betting that the stock value would drop. They borrow shares, wait for it to drop, and buy them back at the lower price. The buy-back boosts the value back up and then they sell, they profit—all good times had by the big-time investors. GameStop was their stock of choice, and it was just a matter of waiting. At least, that was the plan.
This time, the internet stepped in. Redditors from the group r/WallStreetBets bought a massive amount of GameStop shares, which skyrocketed the price. Some of them sold shortly after, making hundreds of dollars in a few hours. Some waited longer, making thousands. Some played the long con, paying off loans, debts, bills, even hospital bills from cancer treatment. Sounds like a win for them for sure.
The issue comes in now on the investor side. The investors need to keep buying to maintain the stock’s current value, not to lose their borrowed value. All this is doing is boosting the price even more until something crashes.
GameStop was not the only target. Nokia (the phone company) and AMC (the movie company) are involved as well. Large investors made their bets, the internet caught wind, and a blood feud ensued. It doesn’t end there, however. One popular app used by individuals is called Robinhood. It allows you to buy and sell shares on an individual level for your finance, and with a name like Robinhood, it makes sense that they’d enable the poor to take from the rich, right?
Robinhood doesn’t see it that way. They’ve blocked users from viewing the stocks involved, which is excellent for the stock as it keeps new users from buying in and elevating the prices even further. It’s terrible for the users, as now these users can’t back out to keep their money safe. There are two sides to this issue. On the one hand, it admittedly sounds like market manipulation to have an entire group of Redditors buy a single stock to boost the price, only to sell for profit, thus dropping the value to worse than before.
On the other hand, that’s what the whole point of the big-time investors’ game was in the first place. On the third hand (sprouting from your hip), what Robinhood is doing may not be the same kind of manipulation, but it is problematic as the users’ stock and money are, for the most part, locked behind Robinhood’s service. It’s not easily or quickly transferrable to other services, which forces the users to watch their investment plummet as the market will inevitably shift and the value will drop again.
What do you think of this whole story? Is it a win for the little guy? Did Baby Brother get his shot at the blue Boardwalk square in the monopoly game that is the stock market? Is Robinhood’s intervention called for, or is it causing more harm than good? I guess we’ll find out when this wildebeest grows up and learns to talk on its own, won’t we?