How A Reddit Group Blew Up GameStop’s Stock Over 1700% And Is Turning People Into Millionaires

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The GameStop frenzy on Wall Street that’s happening right now has investors, and much of the internet, in a daze. Some will fail, some will walk away with insane profits and some are just watching from the sidelines in awe.

In this story, there are heroes and monsters. The heroes…a group of Reddit users. The monsters — large hedge funds who short stock and make money by routing for stocks to fail.

A band of mostly young day traders who coordinate on Reddit to drive up the share price of struggling companies, including GameStop (GME), but also BlackBerry (BB), Macy’s (M) and AMC (AMC). At least one Reddit user posted that he’d paid off thousands of dollars in student loans with his GameStop gains.

We should mention that just a few weeks ago — GameStop stock was running at around $19 per share. At the time of this writing — the stock is getting ready to open at over $340 per share. Crazy!

The entire reason behind these insane pushing on stock — to take down the big guys!

People have been buying the stocks in order to drive up the price, and they clearly succeeded. This hurts large hedge funds and people called ‘shorts’. Shorts make money on stocks by routing for the stock to drop in price — not move up. When shorts are involved in a stock, it’s frustrating to everyday traders, who look for the stock to rise in price, in order to cash out profits. Well, those everyday traders have had enough of shorts and together, they crushed them.

However, the movement may have been to swift and it has gained a lot of attention. So much so, that some trading platforms, including TD Ameritrade and Robinhood, are restricting trades on AMC and GameStop. The SEC and the White House on Wednesday both said they were monitoring the situation.

So why GameStop?

The popular Reddit page WallStreetBets is fond of targeting short-sellers. If you’ve ever played craps, these are the guys betting against the table, and their tactics, while often lucrative, have burnished their reputation as bloodsuckers and other, unpublishable, names.
It’s not hard to understand why someone would short GameStop, however. The company is expected to lose money this year and next. Sales growth is sluggish because gamers no longer need to go to the mall to buy games or consoles. That said, some investors have argued that GameStop was seriously undervalued, especially when video games have become staples of the stay-at-home pandemic era.
It’s not just GameStop!
A similar story was playing out with shares of AMC, the movie theater chain that’s been devastated by the pandemic.
Shares of the new WSB plaything were up more than 200% Wednesday after members of the Reddit board and investors on Robinhood were touting the stock. The hashtag #SaveAMC was trending on Twitter.
Both AMC and GameStop spiked so rapidly Wednesday they triggered automatic halts designed to protect against volatility.
Think about it…
While many people are losing millions of dollars on these moves…there are some that are raking in massive profits!
This of the GameStop employee who has been taking advantage of the Employee Stock Purchase Program the company offers…lets say that an employee has been taking advantage of this program for years. If that employee had just 500 shares of GameStop stock this morning — they would be able to cash out for roughly $170k.
It will be interesting to see how this plays out over the next few weeks!