GameStop stock hits a record high after a short-term hot pursuit supported by Reddit

GameStop inventory It soared to a record high last weekend, reaching $76.76 per share on Friday, an increase of nearly 80% in a single day.

In the past week, GameStop’s share price has been growing steadily, from nearly $20 per share on January 12 to a peak on Friday, thanks to user activity on WallStreetBets that users continue to launch, and YouTube and TikTok investment accounts. Some activities (thanks, GamesIndustry.biz).

According to Bloomberg (paywall), the day trading promoted by Reddit on Friday made GameStop (or GME) the most actively traded U.S. stock that day. Because Reddit supports the high volatility of the stock, the transaction has even been suspended many times. . “Short squeeze” of stocks.

The short squeeze basically works like this: some investors, known as shorts, bet that the company’s stock will fall over time. These investors borrowed and sold shares from other traders, even though they planned to buy back the shares when the price finally fell in order to return them to the original owners of the shares (thanks to The Verge). Of course, short selling carries risks: if the stock performs beyond its expected trajectory, the original short seller may repurchase the stock at a higher price to return the stock, which in turn pushes up the price. You will see the way forward.

Various threads on WallStreetBets and a large number of videos uploaded by financial influencers have urged savvy traders to buy large amounts of short stocks to take advantage of rising stock prices.

Several posts on Subreddit seem to suggest that day traders who profited from the surge paid off their student loans, among other achievements.

There is some controversy surrounding the short squeeze backed by Reddit, and there is speculation that GME stock activity may break out again on Monday and Tuesday.

Traditional financial institutions such as Goldman Sachs have particularly criticized Reddit’s “greedy hive”, which likes to adopt “engineered short-term austerity measures.”

Previously, the highest price of GameStop’s stock was set at $63.30 per share, which the retailer managed to achieve in 2007.

WallStreetBets quickly gained a reputation among traditional financial companies. The community played a role in the Hertz bankruptcy rally in 2020 and has been supporting the substantial increase in the value of Plug Power, AMD and Nio.