David Azzato: A Tale Of GameStop And The Little Guy
David Azzato talked about how the headlines surrounding GameStop, discussion about stocks, and personal trading increased in unusual places like Reddit. A website with similarities to a chat room where people go to post what is on their minds. Reddit provided the background for the event surrounding GameStop, much to the annoyance of those big wheelers in the trading game and institutions. According to David Azzato, it came as a surprise when small day traders on Reddit played a huge role in the price of the stock of a business. So how did this happen? Follow David Azzato on his Twitter.
A group of subreddit traders began trading on GameStop stock, which increases the company stock value in only a few days. The price of the stock kept rising, even though trading professionals expected it to fall. This situation brought on a change that forced a stop in trading.
Here is what happened. A trader on Reddit/WallStreetBets decided that GameStop’s worth should have been higher than it was currently selling. He told others. They agreed with the trader, and they saw it as an excellent investment to purchase at the current amount. This shouldn’t have been a problem, but here is where fund managers come into the picture. Because they saw it as an excellent investment, they purchased the stock and then sold it. Buying it while it costs less and sells it for more is a philosophy that has been around for a while.
These managers thought the stock would decrease, and they had billions of their clients’ money. This became a problem for them because the people on WallStreetsBets continued to buy the Gamestop stock, and the stock kept increasing in value. People who believed in the trader’s arguments kept buying the stock and earning more money. Many rumors helped make their investment more lucrative. Those rumors include everything from the co-founder of Chewy having an enormous investment with Gamestop to the company becoming digital. The rumors made the stock more attractive to buyers. Because Reddit traders continue to believe in the stock by buying it and increasing the value, those investors who trade in short-sales like hedge fund managers were losing profit.
All the events surrounding this incident happened because a group of investors on the subreddit paid attention to one trader’s argument about a particular stock. More people got into the action after word leaked out online and drove the prices up further, and as for those professionals who made their living off short sales well left out in the cold from all the money they lost.
If there is a lesson to learn from this situation is that a little guy can still make a big difference in the price of a stock. Visit: https://soundcloud.com/davidazzato