The Rundown on Game Stonks
Trin Whitesel, staff writer
Companies such as Robinhood and Acorn are the middlemen for common folk to purchase stock and hitch a bandwagon to the market. College aged people, between 18-25, are the targeted audience for these companies who present themselves as a platform to provide access to the open trade market for people who typically are not involved.
These companies’ processes are supposed to be easy, informational, successful and without any stress. Because our American education system denied us education on the matter of stocks and bonds, this was supposed to be a sort of loophole.
I had never engaged in many conversations about the stock market because I never quite understood the implications of stock. I thought I needed to pay a broker to manage my stocks for me; I am already eating ramen for breakfast so that wasn’t much of an option for me!
I thought wrong. I found out about the common folk working the stock market after Redditors placed bets against the market by purchasing GameStop stock at an underestimated price of $38, ultimately raising the price to $454. Robinhood retaliated and pigeonholed the GameStop stock and restricted individuals from purchasing shares.
I spent a lot of time on Youtube trying to grasp an understanding of the stock market and what was happening during this GameStop fiasco. During my time I found no statement made by Robinhood to explain their actions or a public apology. The question of why Robinhood broke their promise of open trade is still unanswered. What other restrictions are they creating that prevent their users from participating in open stock is now a growing concern.
A possible theory is that the owners of Robinhood wanted to prevent the growth of GameStop stock because they partake in the hedge funds or investment firms that made bets against GameStop. These bets are called shorts. The hedge funds borrowed shares in GameStop sold them, and now have to buy them back at the current price, which will cost them billions of dollars.
A group of Redditors from r/WallStreetBets are the ones who initiated this trading frenzy. They thought that the market underestimated GameStop and flooded the market to purchase stock. Redditors also bought AMC Theater, Nokia, and Blackberry stock. These internet investors are people largely around the age of 25 who are not brokers, but are involved in trade.
Their ability to ban together to take down hedge funds is a major transition of power from sophisticated Wall Street brokers who invest millions of dollars to common folk who invest hundreds. This is a transition of power we haven’t seen since Rockefeller was a common name.
A concern is that companies like GameStop and AMC are not following the popular trends of direct online sales, which is why they were short-sales, but after this last week on the stock market, the public could be seeing a dramatic shift in their sales pitch.