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Gamestop & Robinhood?
Can someone break down in more simpler words, what is going on with gamestop and robinhood?
- Chris AncorLv 72 months ago
Robinhood was quite a good old adventure game, I don't know about the other one.
- darkvelvetrainLv 72 months ago
Robinhood sold shares of GameStop. Market speculators predicted GameStop would lose value over time. Hedge funds short sold the stocks, essentially selling at present day value with a promise to buy at a future date, as they expected the value to drop, so they would profit. Redditors came in and bought shares in large numbers increasing the value of the stock. They made a killing, while the hedge funds lost a lot of money.
This is something that happens every day, but usually it is the hedge fund managers that screw common stock holders. Since they got a taste of their own medicine, Robinhood manipulated the market by preventing common stock holders from making trades while the hedge fund managers still could.
Basically if Robinhood execs aren’t in prison soon it is confirmation that the markets are set up for everyday investors to lose.
- dewcoonsLv 72 months ago
A group of young reddit users realized that some of the large hedge funds where "selling short" on Gamestop stock. These means that they were selling stock today (at a reduced price) with a promise to deliver the actual stock by a future date. The hope is that the price of the stock will go below the price at which they sold it during that time. If it does, they then pay the stock at the lower price, turn it over to the buyer, and make a profit.
The reddit group realized that the funds had to supply hundreds of shares of stock in the very hear future. So they began buying every share that was available. That meant there were none of the hedge fund people to buy. So they had to keep offering more and more for shares, and that drove the price from $11 a share to over $400 a share.
The large hedge funds, which HAD to have the stock to fulfill their orders, stood to lost billions of dollars. They had sold the stock for under $11 a share, and would now to buy it for over $400 a share. A lose of $390+ on every share.
Several trading sites (including Robinhood which the reddit group was using) suspended sales of the stock. This is done when there is this type of a run on a stock. You could only buy and sell the stock if you went to the exchange and did it in person. It locked out the reddit people (and others who had jumped in the buying rage.)
The hedge funds (since they have people at the stock markets) were then able to sell stocks to each other at a much lower price. This cut the losses for the hedge funds. But it also meant there was no demand for the stock the reddit people had, so when trading resumed a couple days later, no one needed/wanted to pay the stock. So the prices dropped back down.
Those who sold their stock before the trading was suspended made a lot of money. Those who did not probably lost money (depending on when the frenzy they brought the stock.) The hedge funds managed avoid huge losses.
This is something that happens quite often on the stock market. This one just had a lot more visibility then most because the reddit people were sending out the information to everyone.