GameStop’s Stock Price Craze

Article by Martin

Visual by Solenne

Edited by Joaquin

Over the past week, the rising stock price of GameStop has seized the attention of observers from all around the world. Recently, in a surprising turn of events, stocks from the declining video game retailer have unexpectedly surged in purchases from independent stock traders worldwide. The sudden mass purchase of this stock can be attributed to the activities of an internet forum, a collection of like-minded individuals or a subreddit known as “Wall Street Bets.” Independent traders from this forum drove GameStop’s stock to around $347.51, an immense spike from its previous $18 price. To counter the growing volatility of GameStop’s prices, Robinhood Markets, a popular trading service utilised by Wall Street Bets’ users, had imposed a purchase restriction on the retailer’s stock, in turn sparking controversy throughout the financial community. While Robinhood may have been famed for its accessibility to many stock traders worldwide, its purchase ban is a clear example of a gross attempt to wrongfully seize control of factors in the market, a clear contradiction of its mission statement to “democratize finance for all.”

As of now, the reasons behind Robinhood’s decision to cease trading of GameStop stock have remained unknown to most parties. Despite this, traders and members of the financial community speculate that their verdict can be described as an attempt to appease investment pools known as “hedge funds.” These hedge funds typically profit from stagnating stocks by borrowing and immediately selling purchased quantities, with the intent of purchasing them later on for a cheaper price, in a high-risk process known as short-selling. While this practice is legal in most markets, most critics label the action as an act of market manipulation. With this in mind, the implications of Robinhood’s controversial gesture to cease trading of GameStop’s stock are vast. While Robinhood has typically been hailed as an accessible tool for traders of all economic backgrounds, regardless of its intentions, the company’s decision betrays its self-proposed ideals and the trust of all of its current users.

Perhaps the most polarizing aspects of the situation at hand have been the motivations of the subreddit, Wall Street Bets. While critics in the media have been quick to denounce the subreddit’s actions as a manipulation of the stock market for quick profit, the recent controversy transcends that. The reasons for GameStop’s stock price increase are twofold: the sudden increase in price both serves as a warning to predatory hedge funds and generates a greater sense of awareness of stock market practices to the general public. While Robinhood’s actions may be justified as an attempt to balance aspects of the stock market, Robinhood, a company trusted by its users for its availability to a wide array of users, betrayed its expectations from the public by electing to cease trading of GameStop’s stock.

While it may seem like Robinhood’s actions may go unnoticed, the company’s CEO, Vlad Tenev is scheduled to testify before the House Financial Services Committee under allegations of colluding with affiliated hedge funds. As a whole, the controversy serves as a testament to unjust control and manipulation of the stock market by parties concerned with seemingly unlimited profits.

Works Cited:

Choe, Stan. “EXPLAINER: Why GameStop’s Stock Surge Is Shaking Wall Street.” AP NEWS, Associated Press, 28 Jan. 2021, apnews.com/article/gamestop-stock-surge-explained-fb377363d1b04809706619a6bcc9e549. 

Gonzalez, Oscar. “Robinhood Backlash: Here’s What You Should Know about the GameStop Stock Controversy.” CNET, 5 Feb. 2021, http://www.cnet.com/personal-finance/robinhood-backlash-heres-what-you-should-know-about-the-gamestop-stock-controversy/. 

Kennon, Joshua. “What Is a Hedge Fund?” The Balance, Dotdash, http://www.thebalance.com/what-is-a-hedge-fund-357524. 

Politi, James. “’Let Them Trade’: Washington Struggles with Robinhood Politics.” Financial Times, Financial Times, 3 Feb. 2021, http://www.ft.com/content/a0ff1262-9f61-4a23-a057-2884cfdec6b7. 

Stewart, Emily. “The GameStop Stock Frenzy, Explained.” Vox, Vox, 25 Jan. 2021, http://www.vox.com/the-goods/22249458/gamestop-stock-wallstreetbets-reddit-citron.