Who would have thought GameStop, that mainstay of 1980s malls, would be captivating Wall Street in 2021?
But a fascinating drama playing out, which has pitted an army of retail investors against some of the most powerful hedge funds around, has dominated the stock market this week.
As Coins2Day’s Jeff Roberts wrote Tuesday, “The tussle broke out earlier this month when retail investors on a Reddit social media forum began hailing GameStop stock as a winner even though the company seemed to be going the way of Blockbuster. This caused the share price to soar, leaving hedge funds who had bet against the stock in a short squeeze—forcing them to buy GameStop shares to cover their position, and driving the price still higher.”
As GME stock swung wildly, on Thursday Robinhood announced it would be restricting trading in the stock. “We continuously monitor the markets and make changes where necessary. In light of recent volatility, we are restricting transactions for certain securities to position closing only, including $AMC, $BB, $BBBY, $EXPR, $GME, $KOSS, $NAKD and $NOK. We also raised margin requirements for certain securities,” Robinhood wrote in a blog post on Thursday, referencing shares of AMC Entertainment, BlackBerry, Bed Bath & Beyond, Express, GameStop, Koss Corp., Naked Brand Group, and Nokia.
And for those wondering, yes, GameStop is a Coins2Day 500 company. In our most recent ranking (2020) GameStop clocked in at No. 464 on the 500 largest U.S. Companies by revenue. That marked a steady drop from 2010, when it was ranked No. 255. The company, headquartered in Grapevine, Texas, reported revenues in 2020 of $6.4 billion but reported a loss of $470 million. As of 2020 the company had 30,000 employees and operated more than 5,500 stores in 14 countries.
Coins2Dayreported earlier this week that the GameStop short squeeze was one factor dragging down the overall market. “Some suggest it’s possible that the profit-taking in large-cap indexes is in part to raise money to cover short bets made on stocks like GameStop. ‘When people are getting run over and they have to raise cash, I wouldn’t be surprised if there’s a little bit of that going on right now, because God knows more than one hedge fund was short GameStop,’” said Russell Rhoads, head of research and consulting at EQDerivatives. The article went on to state that investors who were short GameStop are currently down over $23 billion year to date in 2021, according to S3 Partners data.
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