Over the last few months, a struggling stock has gone from mere ashes to the biggest investment outlier in modern history.
How is this possible you may ask?
Well, it’s not, according to investment theories. What we were seeing was a great example supply and demand. A stock is priced a lot like any other good you buy; it is worth what ever a collective group is willing to pay.
In this, case hedge funds were buying into a stock that was less than $10 a share in hopes of it entering a stalemate.
When a Redditor noticed that there was a bunch of short trade stocks for GameStop (GME) coming to an end on Jan. 29, this masked crusader knew what he must do: Influence the 8.5million follows of r/wallstreetbets to buy into GameStop.
This caused a flux in the demand of the stock causing the value to skyrocket. On Jan. 6, GME closed at $18.38 per share. This is basically where the stock remained until Jan. 25, when it jumped to a peak of $117.07.
But the stock did not stop there! The following day, GME would drop down to $76.76 and close out the day at $145.96.
The record-breaking day would come when GME opened at 9 a.m. at a cost of $371.82 –
a growth of $225 overnight.
The balloon has since popped, and we see GameStop receding back toward its initial cost value of around $12.
As an investor, this one stock has been such thrill ride showing the power of herd mentality and that there is no theory that always applies to the stock market. I do believe that the goals of r/wallstreetbets are completely obtainable. This group has only gained in popularity since its campaign to get GME to $1,000. It now has been in the crosshairs of multimillionaires Mark Cuban (adventure capitalist, Mavericks Owner) and Elon Musk (SpaceX, Tesla founder).
Cuban hosted a virtual Q&A for the Reddit group to answer general questions and investment questions. Elon Musk took to Twitter to support the group with tweets like “GameStonks” with a link to the groups page.
This even had Sen. Alexandria Ocasio- Cortez and Ted Cruz agreeing on the mismanagement of Robinhood putting limits against the buying of the stock.
I do not think this will be the last we see of r/wallstreetbets or the volatility of the market they can cause as a collective.