IDIOTS GUIDE TO GAMESTONKS
Hi! This is Kodo with Kodoan. You can find out more about me at kodoan.com.
That’s K O D O A N DOT COM.
If you keep hearing about the “GAME STONKS” and were kinda hoping for an “idiots guide” version – heads up! this might be just what you’re looking for!
The word Gamestonks is a clever combining of two words (GameStop and Stonks) by an even clever-er-er guy named Elon Musk.
Musk’s short tweet: “Gamestonks!!” shortly after the closing bell on Tuesday, January 26, 2021, added to the price of GameStop’s already soaring share prices which rose nearly 93 percent to a close of $147.98 - more than seven times its value just a month prior. By Thursday, January 28, 2021, GameStop’s share prices reached nearly $500 per share at $483 before closing at $193.60.
Ok, you ask...what the hell is GameStop?
GameStop is an American video game, consumer electronics and gaming merchandise retailer headquartered in Grapevine, Texas. GameStop operated over five thousand retail stores throughout the United States, Canada, Australia, New Zealand and Europe.
As a brick-and-mortar chain, GameStop’s heydays were arguably behind it due to the rise of online video game services like Xbox Live, Playstation Network and others. Now, you could simply download a digital version of games instead of having to leave your basement and walk outside among the “normies”…..ewww!
By 2016, things started to look bad. Shares of GameStop’s stock fell 16 percent throughout the year. The holiday season alone showed a 16.4 percent drop in sales. On February 28, 2017, shares dropped an additional 8 percent following Microsoft’s announcement of its Xbox Game Pass service.
Afterwards, GameStop announced it would close over 150 stores by the end of the year. By late June of 2018, GameStop confirmed rumours of a possible sale. However, on January 29, 2019, GameStop said it had stopped looking for a buyer and was now looking at other ways to regain a financially solid foothold.
It must not have found it because, immediately following this announcement, shares dropped 27 percent to a 14 year low. Help! I’ve fallen and I can’t get up!
Determined to out do itself, GameStop reported a record-breaking net loss of $673 million dollars for the 52 week period ending on February 2, 2019.
Then, along came the “coof”...the “bug potion number 19”….the “great bug of 2020”. The government required GameStop to close its doors on all its stores from around March to May 2020. “It’s just two weeks to slow the spread! Come on people! It’s just to flatten the curve! A year from now we TOTALLY won’t be on lockdown, forced to wear a Niqab like veil on our face that doesn’t protect against airborne disease and have twenty thousand military troops in our nation’s capital!” Nope...no way THAT would happen!
Like Blockbuster movies, 1 hour drive up photo booths and VHS porn, Gamestop was on a downhill spiral of the cultural toilet bowl.
That is….until the internet got involved. Reddit’s “wallstreetbets” forum to be exact.
Wallstreetbets, also known as WSB is a “subreddit” which basically means if reddit was a tree, then a subreddit like Wallstreetbets would be one small branch. Well, not that small. As of January, 2021, Wallstreetbets had 5 million users.
On the Friday of January 22, 2021, users of wallstreetbets initiated a short squeeze on GameStop that, along with Elon Musk, ended up causing its stock price to soar as previously mentioned.
Ok, you ask….what the hell is a short squeeze?
Sounding more like something you’d look forward to on your prom night, a short squeeze is an abnormally rapid increase in the price of a particular stock that has nothing to do with the rest of the market. ….which still kinda sounds like a prom night euphemism if you ask me…
In simple terms, there are two basic types of stock market investors: those who buy stocks for the long term and those who buy stocks for the short term.
Those who buy stocks for the short term tend to be hedge funds and day traders.
Day traders try to make a profit from intraday market price action – gambling whether a stock price will rise or fall from the opening to the closing bell.
A hedge fund is a group of investors that use their power as a group to make money from fairly complex trades in the stock market that others normally wouldn’t be able to do alone. One of these types of complex trades is short selling. Short selling is something akin to betting that your horse will lose instead of win.
In any case, If you were a stock market trader that was betting on the price of the stock to fall, the rapid increase in price would force you to “pay for the bet” quickly in order to stave off even greater losses. This mad dash to avoid losing more money tends to add upward pressure on the stock price. This, my lad’s, is known as the “short squeeze”.
Just such a “short squeeze”
