GameStop’s Wall Street Power Game: How Similar to Tesla
A Wall Street Power Game Behind GameStop Bustles: Retail Crowds, Institutions Trembling
Shares in companies, including GameStop、AMC entertainment holdings and BlackBerry, were once considered hopeless, but have recently been driven out of an eye-popping rally by social-media-active retail investors, while subverting the traditional order between hedge funds and retail investors.
Wall Street’s dominance is shifting. Retail investors are winning at least temporarily and are enjoying it.
Shares in companies such as GME, AMC Entertainment Holdings (AMC Entertainment Holding Inc.,AMC) and BlackBerry Ltd.(BB) were once considered hopeless, but these stocks have recently emerged from an eye-popping rally and subverted the traditional order between hedge funds and retail investors. As retail investors cheer for profit, these professional investors swallow the bitter fruit of losses.
Traditional strategies such as assessing company fundamentals have been left behind, and market momentum has become king. There was a fierce battle between professional institutions and retail investors, which lost billions of dollars in money, while the latter mocked institutions on social media. At the same time, such frenzied trading is raising regulatory and legal concerns.
These netizens invest in novice Reddit、Discord、Facebook and Twitter, encourage each other to buy stocks, show off their victory, and sometimes deliberately unite to make professional traders lose badly. The traders protested that the online army was conspiring to manipulate share prices.
Citron Research Andrew Left has become a target for some investors on social media. He said :” I didn’t expect to be so fanatical .” He also said :” this is a quick money strategy .”
There have been hundreds of thousands of GameStop、AMC and BlackBerry on social media since early january, and these stocks are among the most active in u.s. financial markets.
The huge gains forced investment managers to level off positions betting on the fall in these stocks, which in turn amplified the gains. Short sellers have lost $9.3 billion in GameStop stock alone this year, including $5 billion in losses caused by Tuesday’s rally, according to S3Partners by financial analysts. GameStop jumped 93% on Tuesday to a new high of $147.98, pushing the stock up to 685% in January.
GameStop shares soared to $380 on wednesday, sending the video game retailer’s market value to $26.5 billion at one Delta Air Lines Inc.,DAL’s.
Sam Daftarian ,44, said he used to think that stock trading should be the work of professionals sitting in big city skyscrapers, but he also started speculation during last year’s stock market crash. Daftarian was a law school student recently.
Shares that have recently made Daftarian money include troubled cinema chain operators AMC, which rose 26% on Monday, a volatility rare in the company’s history. Last year, when AMC shares hovered around $4, Daftarian bought more than $1,000 worth of shares. He also invested in a small AMC option, which is expected to more than double its value in the near future. AMC are trying to avoid bankruptcy recently.
Daftarian said he wouldn’t have tried to get an online law or undergraduate degree if he had realized how lucrative stock trading might be. He said Tuesday ,” Tell the Wolf of Wall Street that the pigeons in San Francisco will eat your lunch .” AMC shares jumped 12% on Tuesday.
Individual investors tend to lose when betting heavily. When oil prices unexpectedly hit negative last year, individual investors suffered billions of dollars in losses, while market veterans made plenty of money. Some retail brokerage platforms sell “free” transactions to individual traders, but the actual situation may vary greatly. High-risk, leveraged stock market funds designed by bankers and other professionals have caused losses to individual investors.
Noah Williams, a 36-year-old atlanta resident, said he had made nearly $150,000 over the past two weeks through GameStop options, enough to repay more than $43500 in remaining student loans. He started buying GameStop shares last fall, initially at $16 and currently holds about 1,100 shares. He has since bought more stocks with the remainder of the profits from GameStop options positions.
Williams said :” I think one of the points learned from this is that fundamental analysis does not apply to individual traders .” “This is driven entirely by market sentiment ,” he said. The only reason Tesla has the current valuation is that people believe in the company .”
Williams recently updated his profile on the LinkedIn and added a “Short Squeeze Astronaut” title, which is related to the hot WallStreetBets forum on the Reddit. At this forum, traders often boast that stocks like GameStop will “fly to the moon” and add emoji to rocket ships. Williams said he didn’t intend to sell his shares until GameStop shares reached $1,000.
The demand from individual investors has made it difficult for online traders, with companies including Fidelity Investments Inc. and Vanguard Group experiencing slow speeds or other technical failures. Brokers such as Charles Schwab Corp.,SCHW、TD Ameritrade Holding Co.,AMTD and Robinhood Markets Inc. are also raising margin requirements for trading GameStop securities. This is what brokers usually do when the volatility or risk of a security changes.
Financial Industry Regulatory Authority’s former law enforcement chief Brad Bennett said Securities and Exchange Commission,SEC staff may be investigating information on trading activities and Reddit. To prove any type of fraud, such as market manipulation, he said, it was necessary to confirm that traders transmitted false or misleading information to manipulate stock prices. A us SEC spokesman declined to comment.