GameStop stock became a hot topic over the last weeks after talks of massive short selling flooded r/wallstreetbets leading one of Ferris’ own, Auto Engineering Technology junior, Dominic Loffredi to invest.
Multiple hedge funds decided to short sell shares of GameStop which led to the internet trend of also trading GameStop. A short sale is when someone offers to lend X number of shares of say GameStop at $20, those shares are then sold with the intension that they can be bought back at a cheaper price and returned to the lender while the borrower keeps the sale profit.
“We saw the volatility spike and we’re all on wallstreetbets already. We’ve been on the subreddit for quite a while now and we saw it popping off and decided to hop on and it’s been downhill from there,” Loffredi said.
Loffredi bought eight shares at $83 on Jan. 26 and purchased again on Jan. 28 at $240.
By the height of trading, there weren’t enough shares to go around. So how did a failing brick and mortar game retailer go from insignificant to the center stage of the stock market?
On Jan. 11, GameStop appointed three new directors to its board, this is sparked the initial trading and by Jan. 13, the stock was up more than 50% closing at $31.40 a share. This was just the beginning of the spike.
From there on the stock kept rising and by Jan. 23, the stock was going up by 50% every day until Jan. 26 when Tesla CEO Elon Musk tweeted “Gamestonk!!” with a link to r/wallstreetbets.
After that tweet and an earlier tweet from Chamath Palihapitiya endorsing the stock and that he also was investing, after-hours trading had the stock up 144% opening on Jan. 27 at $354.83 a share.
On Jan. 28 retail traders were surprised that they could no longer trade with ease on apps like Robinhood who had then restricted trading on stocks like GameStop and AMC. All of the platforms that restricted trading put similar statements citing large risks with the increased market volatility.
These decisions were met with backlash and even after companies restricted trading, the stock had its most volatile day yet starting at $483 and closing at $112.25.
“Robinhood took an easy out by limiting trading, call it what you want, if it’s a capital requirement, or a liquidity issue… or if they were allegedly working with Citadel, it is what it is. You can’t say they were doing something if you can’t prove it but it definitely should be looked into further by the SCC…” Loffredi said.
Assistant Professor of Economics Dr. Alex Cartwright gave his views on the situation.
“While I am happy that this has gotten people’s attention on the stock market and that they want to know more about it, they should realize short squeezes like GameStop are like trying to catch lightning in a jar,” Cartwright said.
He went on to discuss investment apps like Acorns that have the user invest in low-risk items like index funds and the app makes sure the user has a diverse portfolio to mitigate excess risk.
The stock continued to rise and fall for the rest of January and has been on the down turn since Feb. 1.
“I’m currently down about $800, we’ll just have to see how much I can knock down off that. I’m hoping it will get back up to around $150 so I can just cut my losses,” Loffredi said.
He went on saying he’s hoping for a bit of a spike so he can minimize his losses but had a good attitude and said that this is what you have to expect when playing the stock market.