“I thought I could make a lot more money by continuing to trade. What was especially intriguing about the event was just how much it imbued several inexperienced traders with a false sense of mastery in trading and financial markets. There were huge winners and even bigger losers from the price volatility of those few exciting days in late January 2021, with those who cashed out in time enjoying significant gains.
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In Sherman’s place came former Amazon executive Matt Furlong in June. Indeed, one analysis put the amount they took in personal windfalls generated from its stock price’s notable few days at $290 million-more than the company’s entire worth prior to last year’s events. A number of high-profile staff, including its former CEO George Sherman, have exited the company since the meme-stock craze, profiting handsomely on their way out the door. Up until very recently, GameStop ranked within the S&P 1500 Index’s 100 worst performers over the course of the preceding 12 months. “The speculative frenzy, and just betting on stocks with nothing more than the hope that they’re going to keep going up, has faded away.”Īs for GameStop itself, it has certainly been an eventful year, although, in terms of its share price, the last few months haven’t exactly been the kindest. “Now it seems that meme stocks are becoming a thing of the past,” Craig Birk, chief investment officer at Personal Capital Advisors, recently told CNBC. Whether such stocks will ever have quite as much of an impact on markets as they did a year ago is questionable, however. So, what have we learnt from those breathless few days, if anything? Well, for one, the term meme stock has certainly made its way into common parlance, as has meme coins in the cryptocurrency world, such as Dogecoin. Meanwhile, the losses quickly mounted for hedge funds, with some figures at the time showing that on the 29 th, short-sellers were in the hole for nearly $20 billion on their mark-to-market (MTM) positions in GameStop, while $36 billion of value was wiped off. By the 25 th, it had soared to $76, and by the morning of the 28 th, it was trading at a staggering $483, its all-time high. The first three weeks of January saw GameStop’s share price double to almost $40 per share on the back of this buying by retail traders. This intense buying activity inflicted a “short squeeze” on the hedge funds such that they had to buy back the stock at significantly higher prices, incurring billions of dollars of losses in the process. Indeed, the start of 2021 saw around 10,000 individual accounts trading GameStop per day by the end of January, that figure had shot up to a whopping 900,000. Having borrowed and sold the stock, however, r/wallstreetbets traders decided to buy GameStop stock in increasing numbers to drive up its price. As such, many big fund managers decided to short sell the stock-that is, they borrowed the stock to sell it on the market in anticipation that its price would fall significantly, at which point they would buy back the stock, return it to the lender and lock in a sizeable profit. But smaller retail traders who had discussed GameStop’s prospects in Reddit forums thought otherwise, and, by the end of 2020, their bullishness had helped push the stock back up to around $20.īut in the eyes of hedge funds, this recovery made GameStop overvalued.
![hedge fund gamestop hedge fund gamestop](https://nypost.com/wp-content/uploads/sites/2/2021/02/gabe-plotkin-36.jpg)
Indeed, its stock price was on a long-term downward trajectory, from just under $50 per share at the start of 2014 to $3 about six years later.
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To briefly recap what happened on those few action-packed days in late January 2021, much of Wall Street regarded GameStop as an ailing company with an outdated brick-and-mortar business model that was on the road to failure. In doing so, a veritable army of small traders sent the price of the struggling video-game and consumer-electronics company into the stratosphere before it crashed back down to earth a few days later and inflicted a hugely painful squeeze on short-selling hedge funds in the process. It’s just over a year since the financial world was deeply shaken after the online retail-trading community-mostly concentrated within Reddit forums such as r/wallstreetbets (WSB)-decided to take on Wall Street over GameStop and other meme stocks, such as AMC. By Alexander Jones, International Banker