GameStop's stock price is surging, and it's because of Reddit

Jan 27 2021, 10:39 am

The stock market is blowing up for GameStop, and it’s all because of Reddit.

The Texas-based video gaming company is now trading at over USD $330 on Wednesday afternoon, when over a year ago it was below USD $20.

Stock as of Wednesday, January 27/New York Stock Exchange.

According to MarketWatch, GameStop shares rose over 100%, pushing the company’s value to $25 billion, from a little over $1 billion at the start of the month and $10 billion at the end of Tuesday.

The volatile nature of the stock is in part due to the Reddit group WallStreetBets.

For some time, GameStop was a hotspot for short-sellers, which are investors who borrow a stock, sell the stock, and then repurchase the stock to return it to the lender. According to the CBC, they’re essentially hoping the stock price goes down in order to make a profit.

GameStop began getting name-dropped on the Reddit channel as bigger names became invested in the company, like Ryan Cohen, the co-founder of the pet e-commerce company Chewy. Earlier in January, he was added to the board.

Because of this, retail traders began to take notice of the company and saw that by working together, they could overturn the short-sellers and invest in retail stores hit by increased digitization and the pandemic.

With the high stock price, which is exactly what short-sellers don’t want, it seems they’re being driven out by the retail traders for the time being.

At some point, the bubble will burst, making it an unpredictable investment at this time. Only time will tell to see if it pays off.

DH Toronto StaffDH Toronto Staff

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