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Reddit Users Spur GameStop Stock Grows More Than 16 Times

How Reddit gamed the stock of GameStop

Reddit Users Spur GameStop Stock Grows More Than 16 Times

Users of the online community Reddit managed to accelerate the value of GameStop shares by 360% in two weeks, plunging hedge funds and Wall Street into a panic.

A group of private traders found each other in the chat «wallstreetbets», the number of participants exceeded 3 million people. Intending to prevent hedge fund managers from making money from ruining a gaming retailer, they began to massively buy up the company‘s shares.

«This coordinated action by retail investors is a new phenomenon in our industry. They used Reddit resources to have an incredible impact on share prices», – said Jim Paulsen, Chief Investment Strategist of the Leuthold Group.

Many enthusiastic users of the portal posted screenshots of their brokerage accounts, some of which showed astronomical returns of 1000% in a few days. 

«This is gaining cult status. This type of like-minded investor is becoming more and more popular. They don’t just grab the shorts, they also take over the media space, appearing in all the headlines.», – said Quincy Crosby, Chief Investment Strategist, Prudential Financial.

Intense speculative behavior by retail investors is unnerving many on Wall Street as rising hedge fund losses could spill over into other areas of the market. Some also believe this insane rally could negatively impact all exchanges..

«This could potentially destabilize the overall market and its credibility.» – Crosby believes.

Reddit hobbyist investors have begun targeting other brands in difficult times, such as movie theater chains AMC Entertainment as well Bed bath & Beyond. This could invalidate any predictions by Wall Street analysts..

Reddit Users Spur GameStop Stock Grows More Than 16 Times

The operation to support GameStop was originally initiated on January 11th when news broke that an activist investor and co-founder of Chewy, as well as former CEO Ryan Cohen joins GameStop Board of Directors. The stock jumped that day in hopes that Cohen would save the retailer’s position by changing corporate strategy..

As a result of coordinated action from Reddit users, Melvin Capital was forced to close its short-term GameStop options, recording a huge loss, hedge fund manager CNBC said. Andrew Ross Sorkin

GameStop became a protagonist in the US stock market on Tuesday, beating even the likes of Tesla and Apple.

It is worth noting that options trading has become accessible and easy for anyone thanks to new and free applications like Robinhood..

«This is all part of the democratization of the market. Usually when we talk about options, it always has to do with investors, professional managers, and hedge funds. Now this trend is changing», – noted Crosby.