WallStreetBets Vs Wallstreet
If you don't know what is happening in these past few dramatizing weeks you are in a shock as you and me. A few days ago I saw memes popping up on twitter. At first I didn't know what It was and why It was important so I Just glanced it off as a nonsense post. Then what really hits home and piqued my interest is a man who made tons of money from Game Stop by Investing his money on Gamestop. At first I thought It was absurd! A common man like me? Earned 40 million dollars from a dying company? You would've thought that It wouldn't be possible. But with this pandemic everything is possible and everything is exposed in the open. Let's take it back to Game stop, It's no secret that Game stop has been doing not so great business wise and with the pandemic, no ones really buying physicals of the game since everyone is buying the games copy digitally. So a couple of Big boys in wall street saw this opportunity to make money and basically do a move called shorting a business. Let's simply what this means.
You own a super smash Bros for N64 which you purchased for 20 dollars, I agree to pay 1 dollars to rent it to you for 2 months (borrowing) when I get I Immediately sell it online for 20 dollars. I waited for the price to drop, and bought it from another seller for $15 dollars and I gave that copy back to you and pocket the difference. Made 1 dollars and I made 4 dollars. Now instead let's say that a bunch of people decided to collectively start to purchase a super smash bros. All at once. Increasing the demand and driving the price to 50 dollars. I wait hoping the price will go back down before my rental period is due. Then it continues to increase. $75 dollars, $100 dollars and $200 dollars. Then I panicked and waited to cut my losses, I bought super smash bros for 200 dollars and I gave that copy back to you. You made $1 and I lost 181 dollars. Additionally My purchase of the game continues to drive up the price, in theory the potential losses are limitless; the price could keep going up. Hedge funds are financial partnerships that use pooled funds and employ different strategies to earn active returns for their investors. These funds may be managed aggressively or make use of derivatives and leverage to generate higher returns. Hedge funds are used by Billionaires or shorters for high risk high reward sort of thing and one in particular is Melvin.
One redditor online noticed that There were more shares than what there were of their stocks and noticed that those shares were borrowed. Those are fine since the intention is to pay them back in the future anyways and he knew that Gamestop still had a lot of money in cash anyways since they were still paying their debt and they were also migrating to something that's beneficial which the Game stop companies future was still bright. He started investing in the company and encouraging people to do it as well. What started as a joke became something of a movement because soon they noticed they can gain money while also exploiting the billionaires in wall street. Wall street has been playing by these rules since the 2008 recession. Where many people lost their homes and their life. They had played with our losses and gained from it while drinking a martini and buying their second yacht during those times. They were also talking down on us saying were stupid and financially illiterate. The occupy wall street movement was born because of what happened in 2008. Also because the government bailed out the people who
were responsible for that housing crisis. They have ruined our life and 2 generations of American dreams because of loans and debts. Many families' lives were ruined! Many people were unemployed.