What’s Happening To GameStop Stock Now? (Updated)

3/15/2021 UPDATE

GameStop’s stock has been wildly volatile since February 23^rd, when it jumped up an astounding 104% to $91.71 at day’s close. Since that jump, the stock’s price has surged another $150, and is currently sitting at $243 as of March 15^th. There’s been an incredible amount of speculation as to why and how the stock’s price could’ve spiked so quickly and forcefully, and many fingers are pointing to what’s known as a “gamma squeeze.” 

This is a concept wherein option sellers are quickly hedging positions by buying shares. This additional purchasing of shares drives price up, causing additional option sellers to buy shares, which again drives up the price. This cycle causes the price of a stock to propel upwards at a blistering pace, and is what most likely caused a surge in price of GameStop’s stock from $137 to $265 in just three market days, from March 5^th to March 9^th.

Additionally, GameStop’s share price experienced a profound and lightning-quick crash on March 10th. Again, speculation exists to why this crash occurred, but the size and speed of the crash were absolutely blistering. In a period of about twenty minutes, the stock’s price was halted six times. Halts are caused by substantial changes in price in only a five-minute period, so six halts in twenty minutes give a picture of just how volatile the stock was on March 10^th. 

The price steadily increased from $242 per share to $340 per share before plummeting down to $203, again in a matter of about a half-hour. The price slowly recovered back to $240 and has been hovering around this price for the last several days. A number of theories have been floated as to why the price dropped so thoroughly so quickly. Some believe a large player, such as a hedge fund or multimillionaire, sold a substantial number of shares or options, causing the price to fall. 

This falling price then initiated “stop losses” price points shareholders set which, when triggered, cause the stock to be sold automatically. The initial sell-off may have resulted in a domino effect which saw hundreds of thousands, if not millions, of stop losses triggered, driving the price further down with each new automatic sale. This is purely speculative, however, as many experts and institutions are only piecing together motivation for GameStop’s price a few days to a few weeks after it occurs.

2/26/2021 UPDATE

GameStop shares jumped an astounding 104% in the final hour of trading on Wednesday after a congressional hearing regarding news about the stock. This surge was met with incredible volatility which caused the stock to be halted a number of times throughout the hour. The stock closed at $91.71 which triggered the halts seen on the stock. 

Speculation exists as to why the surge occurred and some believe it’s due to the company’s chief financial officer’s resignation. Jim Bell stepped down from the company at the request – or demand – of its new primary investor, Ryan Cohen. Cohen is trying to reshape the image of the declining retailer and is currently trying to mold the company into a digital giant. Wednesday’s wild final half hour is extremely similar to the buying spree which consumed the stock in late January, when it jumped from $30 to nearly $500 in the span of less than two weeks. 

Speculation swirls around the current short interest of the stock and the potential for another huge run-up in the coming week or two as many investors’ eyes turn back toward the stock. A number of Reddit users have been watching the stock closely and holding shares with a resolute refusal to share, believing a “short squeeze” to be imminent.

Original post

Last week we discussed the infamous rise and fall of GameStop stock that took place in January 2021. On February 2^nd, 2021, the price of GameStop stock fell dramatically. Prices stayed low the entire day, and there was an 81% drop from GameStop’s peak price of $483/stock. 

Three days later, on February 5^th, GameStop stock was back on the rise, and it continues to be. However, this roller coaster ride is far from over.

Today we’ll take a closer look at what’s happening and the government’s response. First, we’ll dive into the message that the event has sent to investors and the public.

Because of how far the price of GameStop stock has fallen, the message about meme investing has changed. What r/WallStreetBets did now looks more like a “pump-and-dump” strategy rather than an organized plan to “stick it to the man” – i.e., big Wall Street hedge funds. Some people believe that what Reddit did is not about democratizing finance; it was basically just gambling.

Of course, the Redditors on r/WallStreetBets disagree with this analysis of their actions, and many are actually suffering major losses since the price of the stock plummeted. Some Redditors on r/WallStreetBets have blamed the decrease in the stock’s value on hedge fund market manipulation. 

The RobinHood app and its founders have been a subject of great scrutiny. As we discussed previously, RobinHood is an online trading platform that allows anyone, anywhere, to invest (if they have the funds). Government regulators are concerned with Robinhood’s influence on the market. 

The CEO of RobinHood, Vlad Tenev, said that there was miscommunication about why they blocked users from buying and selling GameStop stock (and other meme stocks) at a certain time.  

The real reason that RobinHood blocked sales was because of a clearinghouse, which essentially promises that the firms are good for the money. The National Securities Clearing Corporation asked RobinHood for about a $3 billion deposit during the rapid rise of GameStop stocks, and RobinHood couldn’t deliver. 

There are a lot of people interested in what’s going to happen to the players, like Reddit, RobinHood, and the hedge funds, in the aftermath of these events. On Thursday, February 18^th 2021, the House Financial Service Committee will hold a hearing to examine what exactly occurred and what should be done. 

The focus of the hearing will probably be on how the process should work when it comes to hedge fund traders, market makers, and the responsible parties for online forums such as Reddit. The Justice Department has also launched an investigation into the trading activity.

Many brokerage firms and securities regulators are alarmed that this could have happened. Regulators must find a way to fairly monitor social media’s impact on the stock market. 

It’s impossible to know if this is the end of the GameStop stock roller coaster. Reddit users on r/WallStreetBets continue to insist that this isn’t gambling; it’s a long-term investment. We’ll see what happens during the hearing this Thursday, and we’ll eventually see what Congress decides.