It began on “WallStreetBets” (WSB), a Reddit message board, with amateur stock investors discussing that the Gamestop stock (GME) was undervalued and that hedge funds (a pooled investment structure set up by a money manager or registered investment advisor and designed to make a return and reduce risk) were short selling the stock to “make a quick buck.” Many in the community referred to this as the “GameStop Rebellion.”
According to Investopedia, “Short selling is an investment or trading strategy that speculates the decline in a stock or other security’s price…Trader may use short selling as speculation, and investors or portfolio managers may use it to hedge against the downside risk of a long position.”
Many of these amateur investors on WSB, a community of over 8.7 million people, noticed this trend was occurring with GME and realized if they all invested in the stock at the same time then the stock would go up leading some of these hedge funds to lose billions of dollars while making a profit themselves.
January 7, 2021 the stock was selling for $18.08. Once these Reddit posts started to gain more traction and more amateur investors picked up the trend, the stock reached $483 when it peaked.
This led to other discussions on WSB about other stocks they could use the same tactic on. As a result, many to begin investing in stocks such as AMC, BlackBerry and Nokia which “peaked at a gain of 839 percent…spiked 279 percent and 68 percent respectively…” according to Bloomberg Businessweek. These stocks according to WSB are typically called meme-stocks.
Robinhood, a popular zero commission (meaning they do not take a percentage of profits from a sale) investment and trading app many of these amateur investors were using to trade these stocks, suddenly halted trading of some of these stocks such as GME and AMC January 28, 2021. This caused those who wanted to trade the stock to no longer be able to buy it. They could only sell or purchase in some cases no stocks and in others limited to one to five.
This led to mass backlash among not just the community but some politicians, both Republican and Democrat, and influential businesspeople as well.
“This is unacceptable…while hedge funds are freely able to trade stocks as they see fit,” U.S. Representative Alexandria Ocasio-Cortez tweeted in response. She also called for hearings into why these investors were locked out of trading.
Senator Ted Cruz and Donald Trump Jr. would also tweet their support for the investors.
“Gamestonk!!” Tesla CEO Elon Musk would tweet in support. “Stonk” is a slag word that WSB often uses for stocks.
The limiting of the stock on Robinhood caused hundreds of thousands of upset individuals to flood the Google Play Store and App Store with one-star reviews shortly after as well filing a class action lawsuit.
“App is a scam. Avoid at all costs. They control the market with the stocks they sell and should that stock have a surge they halt purchasing or restrict it. This app is a scam to get you…” read one of the reviews of the Robinhood app on the Google Play Store.
With these investors restricted on the stock, the price plummeted leading many to sell while others were urging to hold their stock saying that the price would go back up if they held.
Google has since removed over 100,000 negative reviews of the app which brought the app’s rating back up to 4.2. Despite the purging of earlier reviews, hundreds of thousands of individuals gave similar reviews once again putting the rating at 1.1. Google has since said they will not remove the current reviews. Robinhood has as of February 4, 2021 lifted all restrictions on the stocks “after Treasury Secretary Janet Yellen met with federal regulators over market volatility stemming from Gamestop stock and the other short squeezes,” according to inves
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