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Gme meltdown meltdown8/23/2023 The front page of Reddit has been overtaken by videos of Times Square billboards that read “$GME GO BRRR” and planes flying over the U.S. 7.5 million-strong community-mocking news anchors and hedge fund gurus to the tune of slogans and phrases like “DIAMOND HANDS” and “I just like the stock.” As GME skyrockets, a singular chant is heard-“apes together strong.” Unanimous cheering echoes throughout the approx. Fervent investors post screenshots of their massive portfolio losses to the jeering of fellow users, slinging around clips from movies like The Big Short, 300 and The Wolf of Wall Street in reference to their refusal to sell their shares. It only takes a few minutes of browsing through r/wallstreetbets-which describes itself as “if 4chan found a Bloomberg terminal”-to understand the atmosphere of the forum and the motivation of the users. But the motivation behind this event was much, much different. Networks such as CNN and CNBC headed to the morning news to vilify the retail investors behind the scheme, painting them as villains motivated by greed and profit. Popular brokerage app Robinhood halted investors from buying new shares in stocks such as GME and AMC Theaters, resulting in a class-action lawsuit leveraged against the app. Hedge funds such as Melvin Capital that had poured millions upon millions of dollars into shorting GME were hit hard, with Melvin reporting to WSJ that they had lost 53% of their value in a single month. Retail investors on r/wallstreetbets recognized that if users on the subreddit bought and held shares of GME en masse, they could force a short squeeze and beat the hedge funds at their own game. When the share price goes up, the demand increases and there are less shares available for short sellers to cover their position, resulting in a “short squeeze.” As investors scramble to cover their shorts, more and more shares are bought, creating a feedback loop where the stock price skyrockets. When a stock has been shorted above 100%, there is a much greater demand for the stock then there is a supply. When any investor shorts a stock, they must buy back that stock before the short expires. When r/wallstreetbets users realized GME had been shorted at 138%, making it one of the most shorted stocks in the history of Wall Street, they hatched a plan. Security and Exchanges Commission (SEC) cracked down on naked shorts in 2008, effectively making them illegal. Shorting a stock is risky, as it can result in an enormous loss if the stock price goes up.Ī “naked short” occurs when more than 100% of shares have been shorted, indicating that short sellers were selling shares that didn’t even exist. The foundation of this historical event relies on the practice of short selling, where investors will “borrow” an asset, sell it and then buy it back at a lower price, thus making a profit. Outsiders to the United States stock market and the investing world may be confused as to why a steadily failing brick-and-mortar video game store has stock currently worth more than Intel and AMD combined. 27, his portfolio value climbed to $44 million dollars, a considerable growth from his initial $55,000 investment. One particular user, u/DeepFuckingValue-also known as Keith Gill or Roaring Kitty on YouTube-had been hoarding GME shares since June 2019 and was clocking in over a million dollars in gains per day as of a week ago. Gamestop and Wall Street as a whole had been hit by a sneak attack from one of the internet’s deadliest financial forums-the retail investment subreddit known as r/wallstreetbets. It only took a few days for the shares to close at a whopping $347.51 on Wednesday, Jan. 22, higher than it had ever closed in the 21-year history of the store. A little over a week ago, the share price of video game retailer Gamestop (NYSE:GME) hit a historic high, closing at $65.01 on Jan. I don’t know if anyone’s been reading the news lately, but our good old friend Wall Street has been having a bit of a meltdown.
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