Shares for struggling video game retailer GameStop have surged since the start of the year by more than 1,000% thanks to smaller investors banding together on subreddit r/WallStreetBets.
Since the start of the year, GameStop’s stock prices have risen from around $17 a share to about $148 at market close on Tuesday (January 26). Shares of AMC Entertainment also jumped more than 230% Wednesday (January 27) as #SaveAMC was trending amid concerns that the company will file for bankruptcy due to the pandemic. Bloomberg also reported that BB Liquidating, the remains of former video rental giant BlockBuster, saw a spike in its price on Wednesday. These stocks have become a popular play among short-sellers, or investors who think a stock will go down. Reddit and retail traders have been taking notice of how heavily shorted GameStop’s stock was, and they realized that they could screw over the shorts, who must quickly buy the shares they don’t actually own to avoid further losses. The Reddit users realized they could also make a profit if they banded together. A user commenting on r/WallStreetBets yesterday explained,
“Hedge fund managers live in the past, and continue to look down upon the retail investors. They truly believe that we, the average retail investors, don’t know anything about finances or the market (which may be true), and we’re just gambling our money away.”
TD Ameritrade said it is setting restrictions on trades involving GameStop and AMC, stating, “In the interest of mitigating risk for our company and clients, we have put in place several restrictions on some transactions in $GME, $AMC and other securities. We made these decisions out of an abundance of caution amid unprecedented market conditions and other factors.”