The Gamestop Saga- A Talk With Ms. Arakelian: What Happened With Gamestop?
February 1, 2021
The state of the current stock market can only be described as utter mayhem… and for once, the wolves on Wall Street are the ones feeling the pressure.
In a classic case of David vs. Goliath, the scrappy underdogs of Reddit have managed to undermine some of the biggest investors in the country. But, how could this have happened, and what does it all mean?
To start, although it may seem suspicious, the events that stunned stock analysts in late January were 100% legal. There were no lies, games, or trickery of any kind … but there were a multitude of angry social media users with a collective grudge.
In attempts to save their beloved gaming company from bankruptcy, a team of young adults managed to drive up the price of Gamestop shares by over 500%, and, in the process, forever change the nature of the stock market in America. A subdivision of the Reddit website, r/WallStreetBets, caught word that such hedge funds as Melvin Capital, as well as other business leaders, were short selling. Short selling (also known as “shorting”) relies on the promise that a stock will decrease in price over time.
Essentially, the hope was for investors to borrow such stocks and sell them in hopes of re-purchase. Then, when the price falls, buy back their owed stock to return to brokers whilst collecting the leftover profit. However, online users not only bought stocks of their own but encouraged their fellow Gamestop-lovers on WallStreetBets to do the same. This forced stock value to increase rather than decrease, and subsequently crushed the plans of many investors who were involved.
Pantherbook asked Ms. Arakelian, a Mathematics teacher at Franklin High School, to share her perspective on the matter. As someone who has been closely following Wall Street from the beginning of the situation, she is the perfect person to explain some of the specifics of the event.
Arakelian started by saying that it is important to note that not only were private individuals impacted by the situation, but outside pools of wealth. “Pension funds, retirement funds, endowments for hospitals and schools, and scientific research funds all invest large sums of money on behalf of normal people,” she explains. “Market impacts such as this one can have a broad range of side effects on everyone.”
In other words, Reddit’s plan to “stick it to the man” has certainly impacted groups from all backgrounds, not just the top-tier card sharks of the country. While the future of these other parties is uncertain, one thing is clear: if nothing else, the situation seems to have illustrated just how powerful social media can be.
Arakelian agrees, saying, “In the game that is the stock market, there are always winners and losers, and in this case hedge funds have been projected as losers in the media.” While she pointed out that losses have been estimated to be around “6 million“, there are probably “still individuals that both made and lost a lot of money in last week’s frenzy.”
For their part in the stock craze, Reddit, Instagram, and many other social media platforms have demonstrated their true rallying potential among younger generations. The fact that an amateur social news network was able to call the attention of thousands of user accounts is extremely impressive. It is clear that the internet has roles that span from such practices as sharing photos on Snapchat to the brief downfall of the financial market, and will only continue to grow in intensity.
To that, Arakelian noted that the event has, “…show[n] something really interesting about the power of social media“. As for thoughts about looking towards the future, she “…would love to see the power of the internet/social media and collaboration that was demonstrated here used to do something more positive with a greater impact on our society.”
Wall Street investors and social media users alike will be watching, listening, and waiting to hear more news about the stock market following the Gamestop saga. The events of last weekend have elucidated the capabilities of the internet as Reddit continues to toe the line of just how far they’re able to push in a nation-wide perspective.