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28 Jan 2021
3 min read

The GameStop Story: Everything You Need to Know

The GameStop Story: Everything You Need to Know

*OspreyFX would like to state that traders should research extensively before following any information given hereby. Any assumptions made in this article are provided solely for entertainment purposes and not for traders to guide or alter their positions. Please read our Terms & Conditions and Risk Disclosure for more information.

Key Takeaways

  • GameStop’s stock price rises as the game retailer find itself at the centre of a frenzied dual between Wall Street and smaller investors
  • The power of social in influencing market moves

Market patterns ebb and flow.

This is a well-known fact that all traders and market participants live with day in and day out. However, once in a while, a rare event takes place that sets the financial landscape ablaze. We are talking about GameStop, of course. So, if you are wondering why you are seeing GameStop dominate the internet and why this is important, we have summarized the key details below.

The Background

GameStop is an American video game retailer that for many years was a permanent feature in malls across the United States and beyond. Truth be told, the heyday of the shopping mall is now a thing of the past, and with it, a number of brick and mortar retailers may also be facing an uncertain future. For instance, household names like Macy’s or the cinema chain AMC have all been struggling.

Gamestop’s stock was a prime target for shorting. In other words, a situation where traders bet on the company’s stock crashing. This did not sit well with the Reddit group WallStreetBets, a community of approximately 2 million, mostly young traders. Perhaps it is the fact that for many of these millennials GameStop was a part of their childhood and teen years that led them to stand behind the company in a surge of nostalgia. Investor and Chewy co-founder Ryan Cohen joined the GameStop board of directors at the beginning of the year. This was seen favorably by investors and led the retailer’s stock to rise modestly. What happened is the extraordinary part – on Wednesday 27th GameStop finished up at 134%. It seems like the young ones were able to outsmart the Wall Street veterans.

An infamous Elon Musk Twitter comment continued to add even more fuel to this unique market scenario. The EV magnate needs no introduction to viral tweets that influence the fate of anything from canine-themed digital coins to crafts platforms. In the GameStop case, Musk’s simple “Gamestonk!!” pushed the Gamestop trading price up by a staggering further 157%.

 

Power to the People?

If we stop to look at the details of the story for a moment and take a look at the broader picture, what is this all telling us? The significance of the GameStop event lies in the fact that the big market players like hedge funds and short-sellers have essentially been outsmarted by a group of “normal” traders. In a unique twist of events, these new kids on the block traders have demonstrated that there is strength in numbers, even if what is standing on the other side is a group of corporate trading monoliths. The process through which wealth is distributed in capitalism-based societies is mainly centered around large-scale corporations. The fact that a determining action that influences the trajectory of wealth and profit could be made by a non-corporate group of individuals is nothing short of extraordinary.

Does this almost unprecedented scenario set a new paradigm for the trading world? It may be too soon to start theorizing about the long-term effects that the GameStop story has created. Nonetheless, we do know that what has occurred is already significant in itself.

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