Here’s what going on with the stock GME – GameStop – the short squeeze underway, and what this means for stock market investing – Enjoy! Add me on Instagram: GPStephan
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Like the name would suggest, this was a retail gaming shop that sold video games, consoles, controllers, and collectables. But, as the overall video-game market began outgrowing the store, and more and more people shifted towards online downloads versus shopping in outdated malls with nothing left.
In June of 2020, GameStop announced that they saw a 519% jump in online sales when they were forced to shut down their physical locations.
In August of 2020, The Billionaire Co-Founder of Chewy.com, announces that he bought a 9% stake in the company, and plans to turn it into an Amazon Rival through his active involvement and re-management of the company.
After that, they announced a multi-year strategic partnership with Microsoft, with plans to expand both their physical store – AND, their digital store.
Sure enough, digital sales increased – and the Chewy.com co-founder increased his stake in GameStop to now 13%.
And that’s when, about 4 months ago…users on WallStreetBets discovered a little-known secret of the stock that would cause it to skyrocket exponentially, just given the right conditions….and, sure enough, he was right, and EVERYTHING he said 4 months ago is coming true…
He explained that GameStop was one of the most SHORTED stocks on the market, with almost 90% of stockholders betting the price will GO DOWN. In fact, it was SO SHORTED, that MORE SHARES WERE SHORTED than actually exist in the market for sale…so, that’s turning out to be the perfect storm to cause this price to SKYROCKET as soon as there’s ANY GOOD news.
This user theorized that – because SO many people were short on GameStop – EVENTUALLY, all this good news is going to cause those short sellers to EXIT their positions, causing them to BUY BACK those shares at higher prices, and when that happens – the price of the stock goes up, and when THAT happens – MORE people close out their positions by buying back shares at a higher price – and that continues until the price of GameStop goes to the moon.
Now, as for where this goes from here…it’s anyone’s guess. At this point, it has NOTHING to do with the fundamentals of the company AT ALL…BUT, it has to do with a unique situation of a limited quantity of shares available, combined with short seller interest, combined with WallStreetBets, which causes more people to pile in…and it’s a perfect storm, when those people refuse to sell what they’ve just bought.
This is probably one of the riskiest, most speculative bets I’ve ever talked about here on the channel…so, as my word of caution here: DON’T DO IT.
More importantly, though – this DOES represent a BIG SHIFT of power away from large, corporate institutional investors…and into the hands of retail traders, or groups like WallStreetBets. I honestly think the power of retail traders have been GROSSLY underestimated for quite some time, and THIS is a good example that WallStreetBets should NOT be taken lightly. NOT INVESTMENT ADVICE.
For business or one-on-one real estate investing/real estate agent consulting inquiries, you can reach me at GrahamStephanBusiness@gmail.com
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