Hi, everyone. Here’s your breakdown of the top news in business and tech, so you’re ready for the week ahead. — Charlotte Cowles
What’s Up? (Jan. 24-30)
Can’t Stop, Won’t Stop
Who could have predicted that the struggling video game retailer GameStop would hijack markets and cause a Wall Street meltdown? The company’s stock soared an absurd 1,700 percent this month, but not because the company did anything new or special. Instead, it became the focus of hordes of amateur traders — also known as retail investors — who banded together on Reddit message boards and drove up GameStop’s stock price by buying tons of its shares through apps like Robinhood and E-Trade. They adopted similar tactics with underdogs like AMC Entertainment, BlackBerry and American Airlines, inflating their stock prices, too. In doing so, they squeezed big Wall Street firms that were betting against the companies, forcing them to take huge losses.
GameStop vs. Wall Street
Let Us Help You Understand
- Shares in GameStop, the video game retailer, have soared because amateur investors, starting on Reddit, have bet heavily on shares of the company.
- The wave gained momentum in response to large hedge funds short selling GameStop stock — basically they were betting against the company’s success.
- The sudden demand has driven up the share price from less than $20 in December to nearly $200 on Thursday. On paper, anyway.
- It’s not just GameStop. Amateur investors have backed other companies that many big investors had shunned, such as AMC and BlackBerry.
- This bubble around GameStop may force big investors to raise money to cover their losses, or dump shares of other companies.
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