GameStop has been the center of attention in the financial world for the past few days. The gamer/geek retail store has been used to turn Wall Street upside down.
The sharks, who are the big institutional investors, are being ruthlessly defeated by smaller investors. This whole unexpected situation is happening with an attack coordinated by several Reddit users, which in this case are small investors.
The WallStreet Bets subreddit, is a forum where thousands of users talk about investing and it was in this forum where investors caused all the madness that dominated Wall Street in recent days.
The coordinated action changed everything for GameStop, making the company the most sought after asset on the New York Stock Exchange. The development is really surprising, as GameStop, like other retail chains, is in complete decline.
With the situation, in a few weeks the value of the company's shares went from about US$ 15 to a peak of US$ 371,82 on Wednesday (27). At the end of the day, the value of the shares was around US$ 220.
With physical retail losing strength, GameStop began to weaken in recent years, but on Tuesday (26) the company reached a price of US$ 10 billion, something that only happened in 2007 when physical retail was still on the rise. .
Financial world upside down
With all this, the last few weeks have hit the financial world in an unexpected way. The GameStop case caused damage to those who bet on the fall in the company's value and could even sink investors into irreversible situations. So far, investment fund firm Melvin Capital has suffered the most.
In the so-called short position, a fund repurchases shares to the current market at their current value, with these shares needing to be repurchased after a specific period of time. The tactic, known as short selling, is a common way to make money from companies that are in decline or even at risk of bankruptcy, as the idea is that shares are repurchased at a much lower value than before, which provides a high profit.
Melvin Capital decided to bet that GameStop's shares would continue to fall, even more so with the situation of the Covid-19 pandemic that further disrupts retail trade. However, with the coordinated action on Reddit, several users began to make small investments, creating the current unexpected scenario.
Before closing the short position with an estimated $3,5 billion shortfall, Melvin Capital needed a $2,75 billion injection from larger investment funds.
people's joy
If Melvin Capital has been severely damaged, many people in the world find themselves in an entirely different situation. With the action, many won thousands of dollars and some even reached the millions. Several of the beneficiaries say they were able to pay off debts or even found the solution to big problems, such as buying medicine and spending on family treatment.
The unprecedented case is also due to the fact that access to the stock market and the Stock Exchange has expanded to the population of the United States, with applications such as RobinHood.
