The last few weeks, an interesting story unfolded with a gaming company called GameStop, which is EB Games in Canada.
Gamestop stock was extremely low in value last year. With the pandemic, people weren’t shopping brick-and-mortar stores, while digital sales were rising.
This caused some people to bet that the companies stock would go even lower, in particular hedge-fund managers, who did something called shorting the GameStop stock.
A simple way of explaining shorting a stock is you borrow a stock at, let’s say, $10 a share. You are betting that stock will go down to $6 when you have to give it back. You keep the extra $4 multiplied by a large number of stocks.
With a bit of research, people online found out that people were betting millions and millions that the companies value would continue to go down. So a group of people on a forum decided to buy the stock and raise and value of the stock.
Those people betting against the stock would have to buy the stock back at a much higher price. This cost those “short sellers” millions of dollars.
The story of “people hacking” the system is false. People simply did a bit of research and found out about the bets against the GameStop company.
People simply used the system to stick it to those people that usually stick it to others. Those people buying the stock to push against “short sellers” made a ton of money, but it still was a risk.
The people buying the stock had the same risk that others have buying any stock.
This case shows is even regular people when they come together can still change things.
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