This has been a fascinating week for the retail investor community, and how it has brought a hedge fund with billions of dollars to its haunches. A thread on $GME, #YOLO Stocks, $Meme Stocks #wallstreetbets

What is GameStop? At one point, GameStop($GME) was the brick & mortar Netflix of video games. Well, this was until it “almost” succumbed to digital delivery and live gaming; Steam, PlayStation, Google Stadia etc.

Why is it a misfit today? The whole concept of GameStop is outdated since the beginning of the last decade. Since the last 5 years, the company has been sinking. Sales and profits have been deteriorating and income (EBITDA) has been plummeting towards ZERO, it’s almost a goner.

How did things change at GameStop? The pandemic and lockdowns hit its business, stock hit a bottom of $2.57 in April 2020. The future looked bleak, people sold their GameStop stock, decreasing demand. However, this got attention from fund managers trying their luck at “shorting”

Shorting? It is the stealthy act of selling something you don’t own right now, & buying it later to offset the sale since the stock price is sure to go down. You sell high, the stock falls, & then you buy it back cheaply, pocket the difference. Hence Fund Managers loved Gamestop.

It is risky to say the least as you can technically lose infinite amount of money if the stock prices hold or keep rising. One has to be fairly certain that the stock one is borrowing will decrease in price.

Is that what happened at GameStop? Yep. Although the origin of this spectacle is still contradictive, it looks like some Reddit users ( #wallstreetbets) got together to buy $GME & bring down funds like Melvin Capital and Citron Capital, who hold a “short position” on $GME by 140%

This snowballed into Reddit users buying the GME stock and prices soaring by 4000%. This price increase has caused the hedge funds holding this short positions to sweat, and possibly looking at bankruptcy if these prices hold

What’s Elon Musk got to do with any of this? Well, nothing. Except that his tweet gave a lot of visibility into the whole short squeeze! His tweet, “Gamestonk”, drew more attention to the Reddit thread and the technique of driving up GameStop stock, which kept the ball rolling.

It is safe to say that the market frenzy was spurred by social media posts from prominent CEOs and internet influencers. The tweets and threads crated and led to internet mayhem, ultimately pushing the video game retail business to a $24 billion market cap

What is the situation now? The Securities and Exchange Commission (SEC) has taken note of all the volatility in the market and is taking a closer look. The main “enemy” seems to have gotten out of the race, although the stock is still going nuts.

Want to hear a crazy story? Some trading platforms including Robinhood, E-trade, Interactive Brokers halted the option to purchase of $GME on Jan 28, leading the stock to drop 44% from $482 to $257

What Next? It most definitely is the The French Revolution of NYSE as Anthony Scaramucci has termed it. Are there more such stocks? Yes $AMC, Blackberry etc..$AMC has seen similar rise due to #wallstreetbets. The term being used for such stocks are Meme Stocks or #YOLO stocks

Should Indians invest in such stocks? Well, I would always suggest that as an investor you understand the risks before investing your money. DISCLAIMER: I am not a financial advisor to make a call on your behalf. You can, if you want to get in on the action. :-)

@getStockal allows you to trade on US exchanges, have shared the link here. Buy Responsibly ( http://www.stockal.com )