Wall Street's Biggest Event

Many hedge funds recently decided to short GameStop’s stock, or they bet that the price of Gamestop’s stock would decrease. Because of a popular page on Reddit, "r/wallstreetbets,” a huge community of traders was following these hedge funds' purchases. Able to predict the corporations' next step in this market maneuver, everyday people waged a war against these hedge funds.

Redditors decided to short-squeeze the stock. They bought calls and shares, flooding the stock with massive amounts of volume and subsequently causing a huge growth in price. GameStop shares surged to over $400 on January 27th after starting at $14 on December 10th. To put this growth into perspective, if you had invested $10,000 into the company, you would have $285,714 in 2 days. Many people made millions, but this triumph isn't where this event ended.

Many hedge fund companies lost billions, which resorted to contacting brokerage companies into stopping the trading of GameStop stock. This manipulation resulted in one of the biggest trading platforms, Robinhood, suspending the trading of GameStop stock. An uproar from the trading community has ensued, and the United States government may become involved. Many lawsuits and investigations are underway, and people claim that this affair is a prime example of the rich using their power against ordinary people. Robinhood claims their decision to stop the trading of Gamestop stock was for volatility protection, but new information regarding market volatility debunked this as an excuse for the brokerage’s actions. Popular hedge funds influenced Robinhood to add limits on these shares because the hedge funds were losing lots of money.

Robinhood has branded itself as the little guy’s way into the stock market. This reputation as an equalizer may be permanently damaged.