GameStop Stocks Skyrocket

The video game store GameStop recently experienced a rapid increase in stock price that forced many large investors to spend billions of dollars to cover their losses. The controversy even got attention from members of Congress who are calling for a further investigation.

 

Because of the pandemic, more people in the US have been doing their shopping online rather than in stores. Wall Street investors bet heavily against GameStop months ago, thinking that its brick-and-mortar business model would no longer be put to use. They were short selling GameStop stocks to try and make money off of its fall. Short selling is when an investor borrows stock from a lender and sells it at market value. Then they buy back the stock to return to the lender once the rice has dropped, therefore making money from the difference. But this went horribly wrong when GameStop stock price increased by nearly 70%, losing them billions. 

 

Not everyone believed that GameStop stock would fall. Other investors believed that GameStop was significantly undervalued, and used Reddit to encourage other investors to invest in the company. Some listened and purchased stock, and after the conflict went viral on social media this week, additional investors bought into the company, causing it to experience a rapid rise in market value. Just last week, GameStop shares shot up as much as 1,700%, which was catastrophic for the large investors who put billions into hoping its stock would drop. 

 

There are members of Congress who are getting involved in the scandal. On Thursday, Ohio senator Sherrod Brown said that he is planning to hold a hearing on “the current state of the stock market.”

 

Representative Maxine Waters from the U.S. House of Representatives said on Thursday that she is also planning to hold a hearing to examine stock market practices such as short selling that have been highlighted by these recent events. She said in her statement that “As a first step in reining in these abusive practices, I will convene a hearing to examine the recent activity around GameStop (GME) stock and over impacted stocks with a focus on short selling, online trading platforms, gamification and their systemic impact on our capital markets and retail investors.” 

 

The GameStop’s stock increase has caused a lot of controversy all around.