BERKELEY HEIGHTS, NJ- Investing in stocks isn’t a common hobby of teenagers. But in January when the stock market experienced a very unusual rise in stocks that should be falling out, it caused a frenzy in hedge funds and piqued the interest of people of all ages. But why?
On January 25, a group of Redditors on the thread r/WallStreetbets had heard about a large bet that hedge funds had made regarding GameStop. GameStop has been struggling for the past few years with digital games becoming more popular. COVID seemed to be the final factor for the downfall of the GameStop stock.
In December the stock was as low as 12.72 USD and rose in small increments in January until Reddit users got involved. Reddit users came together and pumped investments into the GME stock.
The stock proceeded to rise more than 300% in a matter of days to 347.51 USD on January 27, dipping again on January 28, and then back up to 325.00 USD on January 29. But that was the end of the rally. Hedge funds would lose around $3.5 billion and many of the workers would lose their jobs.
This turnaround in a failing stock sparked interest in playing the market. People who wouldn’t normally invest were eager to get involved.
Sophomore Jonathan Raimi invested into the stock and profited $80. He sold quickly due to the inevitable drop that would occur over the next few days. “I saw a cool opportunity to make some money on something that has never been done before,” Raimi said.
The excitement around Gamestop was short term as investment apps such as Robinhood would proceed in restricting the purchasing of GME and other stocks that Reddit users purchased including theater chain AMC Entertainment Holdings.
But before that could happen, seniors Jason Pien and Jason Lalevee also invested in the stock. Lalevee sold fairly quickly. “I bought 2 shares at $100 each. I was never confident that the stock would even come close to its original peak so I sold at $145,” he said.
Pien, on the other hand, has yet to sell and said that, “I still have not sold yet, nor do I plan on selling anytime soon because I like the stock.”
These unusual circumstances in the stock market were nothing short of manipulation. Todd Decker, economics teacher, said, “I think limiting the purchase of GameStop by those sites was violating the free market. The hedge fund managers are adults and knew the risks when they shorted Gamestop, Robinhood shouldn't have to be looking out for them.”
Since this time, the GameStop stock has fluctuated with a low of 40.59 USD on February 19, and only reached above 200.00 USD for a short time in March. The stock is currently below its March high hovering at or around 155.00 USD.
Nothing the Redditors did was illegal. “[They] just coordinated enough to turn the tables on the hedge funds. There were no contracts, or illegal restraints going on, it was just a word of mouth movement.” Decker said.
Playing the market without understanding how things work can be pretty risky. But this stark rise and sharp plummet show how people who don’t normally invest are able to benefit from stocks.