GAMESTOP STOCK CAUSES POLITICAL UPROAR

February 11, 2021

GAMESTOP STOCK CAUSES POLITICAL UPROAR

In a move for the history books, an epic war has broken out against everyday retail traders and big Wall Street hedge funds. After it became very public that some large hedge funds shorted or placed a bet that GameStop stock for the dying company (GME) would decrease in value, a band of Reddit users on the page WallStreetBets (WSB) combined and bought GME in droves.

This buying frenzy snowballed, with more and more people buying into GME, coming from the hype of WSB. This rush of money into GME caused the price to soar, making investors into the stock rich very quickly while causing hedge funds who shorted the stock to panic.

In less than a month, GME went from $19 a share to a high of $347. That’s an unprecedented increase for a company many considered “failing” before these events started. People buying video games online instead of buying them in-store has hurt GameStop. Because of that, it has been barely hanging on for many years.

Before this buying frenzy started, GameStop stock was actually quite a popular stock for hedge funds to short, as GME stock prices always go down.

GameStop Stock Tipping Point

The climax of this war between the average recreational trader versus the hedge funds climaxed on Thursday. That’s when a popular trading platform for millennials, Robinhood, restricted its users from buying GME stock. For the entire day, traders could only sell GameStop stock, not purchase.

This halted much of the buying for GME, the only reason it reached $300 a share anyway. The price of GME plummeted by $150 that day, losing more than half its value.

Because popular platforms like Robinhood prevented users from buying stock, it resulted in mostly only large hedge funds being able to buy GameStop stock that day.

Political Reaction

Many in the political world avoided comment on this apparently small battle over GME stock. But when Robinhood halted the purchasing of the stock, everyone across the political spectrum showed outrage.

From one of the faces of the progressive left, Democrat Alexandria Ocasio-Cortez to the outspoken Republican Senator Ted Cruz, conservatives and liberals alike cried foul about Robinhood’s actions. Many quickly accused Robinhood of protecting its billionaire funders, who would be in a position to lose potentially billions by shorting GME at the original $19 price.

Republican Representative Paul Gosar sent an open letter to the Department of Justice, demanding an investigation. Republican Representative Lauren Boebert called for Robinhood to be subpoenaed before Congress. Democratic Representative Rashida Tlaib echoed the calls herself for a hearing before Congress.

It has been a rare moment of unity between conservatives and liberals. There has been a populist outrage over Robinhood apparently sticking it to the average trader. With Robinhood letting people purchase GME now, even in small quantities, time will soon tell who will win this battle.

From the investigations, legislation and regulation that will ultimately come from this, Jan. 28 might go down in history as the day casual investing changed forever.

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