The latest GameStop stock surge that shook Wall Street has left many scratching their heads.
After sitting around $18 three Fridays ago, the stocks for the struggling gaming company GameStop doubled in four days. It kept shooting higher, before nearly doubling on Tuesday and then more than doubling again on Wednesday to $347.51. On Thursday, it gave back a chunk of those gains and was down to $229. But it's still up an amazing 1,250% through the first few weeks of 2021.
If that read like Pig Latin to you, you aren't alone. Thousands across the world have been left baffled by the sudden phenomena. And proving this is the social media account of a United Kingdom-based journalist who has been flooded with queries about the stock exchange, thanks to her rather misleading name.
London-based journalist Zoah Hedges-Stocks recently took to Twitter to clarify that despite her rather telling name, she indeed had nothing to do with stocks.
"This is not a finance account," Zoah wrote on Twitter, adding, "I do not have any trading advice". She further added a clarification, in case one was left wondering, "Hedges-Stocks is my surname".
THIS IS NOT A FINANCE ACCOUNT. I DO NOT HAVE ANY TRADING ADVICE.HEDGES-STOCKS IS MY SURNAME.— Zoah Hedges-Stocks (@Zoah_HS) January 29, 2021
The confusion, though hilarious, is not unlikely. In financial terms, hedging is referred to the strategy of minimizing losses and maximizing gains in financial transactions, especially those involving stocks.
With the GameStop stocks surge becoming a global trend and even raising questions in the White House itself, those interested in investing or with money in the market have been left grasping at branches to understand what really happened.
In case you were wondering, it all started when well-known hedge funds like Melvin Capital and Citron Research got interested in GameStock shares. These funds are known to target stocks that they feel are overvalued by going short on the shares.
Short selling or short sellers are those who borrow shares and sell while hoping the price would fall further so they will be able to buy the shares at a lower price and return the shares to the lender. Short selling is a widely accepted practice and is allowed in most of the markets across geographies.
In the case of GameStop, the hedge funds had played their cards and were waiting for the shares to fall and make a killing. They had no idea that an online group on Reddit, where members exchange tips and stock ideas would put a spanner in their plan and the wound would be so deep that they would end up staring at bankruptcy.
In a Reddit group called, WallStreetBets, discussions are full of ideas for the next big trade to jump on, self deprecation and an appreciation of both winning and losing bets, as long as they’re bold. They’ve recently been encouraging each other to keep buying GameStop and push it ever higher, or to the moon.”
A series of users on the Reddit forum 'Wallstreetbets' noticed that GameStop was undervalued by the market and vulnerable to a short squeeze. GameStop’s low share price made it relatively easy for a large number of people to buy in with little money. As the share price rose and rose, more people bought in – both to trigger the short squeeze, and because the price itself was now a way to make money.
(With inputs from AP)