“Price is what you pay, value is what you get.”
At this point in time, not many young investors are paying attention to the value of what they are buying. However, the younger generation of investors have been making quite a splash in the economy as of late. GameStop’s stock has been rising quickly in recent days. To put it in simple terms, the small guys (Reddit) outsmarted the big guys (Wall Street hedge funds), and this caused massive money flow into the company, causing the price to skyrocket from $20 to $400. Even though their stock prices have rapidly changed, what is GameStop’s real value? In order to figure this out, it is important to first look at the company before 2021.
GameStop’s Company History
Most gamers know GameStop as the company that does not give enough credit when trading in games. Most people are also aware that GameStop was going downhill. This decline has mostly occurred because people would much rather purchase digital copies than have to go to the local GameStop. In 2020 alone, the company was forced to close nearly 500 stores. By March 2021, they were supposed to shut down another 1000 stores. Clearly there is a decline in interest for the company, but that changed within days thanks to a large group of young investors.
Joshua Lamm, owner of GameStop shares, commented, “I could see GameStop’s company bouncing back with all of this money flow going on.”
Day Traders Beat the Institutions
It is true that millions of younger, ordinary people were able to beat large companies/institutions. WallStreetBets, a Reddit forum, caused the massive surge in GameStop’s stock. This mass movement is described as a cult to these institutions because, for once, they are not getting their way. Young, less wealthy people are making money, and that is not okay for these institutions.
In reality, this event was exciting and highlighted the ugliness of the stock market. Of course, the stock market is pretty corrupt. For example, during this event, trading apps, such as Robinhood, gave into the pressure of big companies and limited the number of shares ordinary people were able to purchase. This caused younger investors to get furious, switching to trading apps like WeBull. Why can a company like Robinhood just change their supposed values so quickly and with no policy in place? The answer is that they were filled with corruption and anger. The rich want to get richer and have so much power to do what they want. Since the limitation of share purchases, GameStop has steadily declined. “It’s not over; you will see the share price skyrocket to the moon,” Lamm stated.
What Happens Next?
This is only the beginning of the little guys putting a dent in the pockets of the wealthy. GameStop has been slowly dropping since its peak, but that does not mean this stock battle is over. Reddit users believe there will be one last push. However, despite buyers’ best efforts, GameStop is bound to go out of business eventually because unfortunately, there is no demand for it these days. Although GameStop is inevitably doomed, this buying spree has shown young people and those not in the upper class that they do have power in the stock market, despite what big corporations would lead them to believe. Moving forward, there are probably many more stock battles to come.