By now, we’re sure you’ve heard that the GameStop stock has blown up because of Reddit.
What you may not understand, is how, what, or why.
Luckily for you, Brianna Parkins, an ex-financial journalist, has taken to TikTok to explain what’s happened — without the complicated jargon.
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Parkins starts her video with a puppet, a can of Guinness beer, and some candies. She explains the concept of short-selling, using the can of Guinness to represent a stock.
She borrows the stock, sells it for 20 candies, and then repurchases the stock when the price drops. She then keeps the profit of 15 candies.
In her next TikTok, Parkins explains the GameStop scenario. She uses a statue to symbolize Reddit users in the Wall Street Bets forum. They knew that Wall Street was short-selling the GameStop stock, and decided to mess with that by buying up as many stocks as they could, which was going to push the price higher. This is bad for the hedge funds that short-sold, as they won’t be able to make a profit off the original stock.
With regular stocks, you can only lose what you put in, explains Parkins. With short selling, because stock prices can go up infinitely, hedge funds must then repurchase the original stock to try to balance the sheets.
What happened, however, is that with the Redditors buying the shares, stock prices skyrocketed which is called a short squeeze. The Redditors are then looking to sell, and will make a lot more money than they’d initially invested. The stock prices will quickly decrease as people sell, leaving the hedgefunds to possibly lose everything they invested, and more.
Watch Parkins’ explanation below:
@briannaparkinsI explain GameStop to you and short selling before a man named Kyle does without asking. ##gamestop ##newsroom♬ original sound – Brianna Parkins
@briannaparkinsPart two of explaining GameStop and a short squeeze with cans and sweets##gamestop ##reddit ##irish ##australian♬ original sound – Brianna Parkins
@briannaparkinsPart three of explaining GameStop with cans so you don’t have to listen to a dude do it house party at 3am ##gamestop ##reddit ##irish ##explainthis♬ original sound – Brianna Parkins
@briannaparkinsPart four of explaining GameStop with cans of Guinness. ##gamestop ##irish ##explain ##stockmarket♬ original sound – Brianna Parkins