30 Jan, 2021 06:19
The story of the American video game retailer went viral after a group of Reddit users launched a flash-mob, gobbling up the firm’s shares. The campaign resulted in GameStop’s stock price growing over 1,800 percent.
The move washed billions of dollars out of the biggest hedge funds, which were short-selling the stock. Short-sellers commonly borrow shares in failing companies, hoping that, as the price falls further, they’ll sell the borrowed shares cheaper, pay back their lenders, and keep the profit.
RT talked to market analysts to find out what impact the battle of amateur traders and big investors may have on the financial markets and who will come out on top.
“This all-in wrestling will meet with mixed success,” Petr Pushkarev, chief analyst at TeleTrade told RT. “Sooner or later, financial sharks will win, as big hedge fund managers don’t want lose billions due to flash-mobs.”
The expert highlighted that the US authorities would protect the interests of big investors. The latest artificially accelerated rally has already attracted the attention of US regulators and politicians who took steps to promptly halt trading.
US regulators may outlaw such flash-mob activity by amateur investors in the future, according to senior analyst at Forex Optimum, Aleksander Rozman.
“They will find the ‘guilty party’, accuse them of driving up prices of GameStop shares, and punish them publicly,” the expert said, stressing that a scapegoat has already appeared.
Earlier, Reuters reported that a 34-year-old YouTube streamer helped drive a surge in the shares of GameStop. Keith Patrick Gill is a financial advisor from Massachusetts and until recently worked for insurance giant MassMutual.