GameStop's 822% increase after the action on Reddit

GameStop, one of the largest producers and retailers of computer games in the world, recorded huge gains, despite having problems with liquidity due to the pandemic. What a miracle? The Reddit community took matters into their own hands, upset that the big players started to play for the company's price decline.

GameStop is one of the largest videogame retailers in the world, but due to the pandemic, when it sells mostly online, it struggles to maintain its position. Everything indicated that the company's shares may decline significantly. And so did the bigwigs of Wall Street, betting on short wholesale stocks. Short, meaning assuming that the share price will fall. The scale of the phenomenon was so large that information on this subject quickly reached the public. 

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Not everyone liked it, especially those who are often disregarded by big players - small investors. In this case, however, it was not helplessness, but a coordinated action that had an effect. 

Reddit calls for action on GameStop shares

A few days were enough for everything. Last week, information began to appear on Reddit that members of the group wallstreetbets will want to increase their involvement in GameStop actions. First, because they identify with the company, but secondly, they also wanted to beat the noses of confident Wall Street bigwigs. And it must be admitted that they did it perfectly.

GameStop shares increased by more than 822%, from $ 17,25 at the beginning of the year to a high of $ 159,18 on Monday 25.01.2021/100/XNUMX. A similar action was also tried with BlackBerry, once one of the leaders in the production of smartphones, today dusted up and cutting off coupons. Here the result was not so spectacular, but also noteworthy - XNUMX% increase from the price at the beginning of the year. 

GameStop (GME) stock chart, H1. Source: xNUMX XTB.

The faster it grows, the harder it is for sorters

How did it happen? After all, the big Wall Street investors have portfolios that are certainly prepared to counter the speculative attacks - even coordinated - by smaller players. In this case, however, they did not take into account the scale. There are 2,2 million members in the WallStreetBets community, although it is undoubtedly impossible to determine how many people took part in the GameStop and BlackBerry action.

It is known, however, that they bought shares that were put up for sale, and did not wait "lower" with a previously agreed price. In this way, they raised the price, and subsequent investors positioned themselves even higher. The faster the price rose, the greater the positions of those who were declining, because they had to cover deposits in order not to lose everything - that is, to buy more GameStop shares. This clearly fueled the increase in the company's share price even more. 

GameStop rises 51% in one day, a loss of $ 3,3 billion

GameStop shares increased by 822%. So those who bought them earned, and those who bet the inheritance lost. How much? According to Markets Insider, shortcomers on GameStop have lost $ 3,3 billion to date. Almost half of these losses - $ 1,6 billion - came on Friday when the share price jumped 51%.

“The GameStop Rally is one in a series of eye-catching market moves that have nevertheless raised concerns among fund managers. Some of them even claim that buying stocks by individual investors keeps the prices of these stocks detached from their fundamental value " - Wall Street Journal journalists commented.

The cases are not commented on by GameStop representatives. BlackBerry executives have admitted that they do not know any reason for the increased trading activity in the company's shares.