Whenever you hear the term share trading a picture may pop up to your head that it is for the rich investor. They can manipulate it and they can dominate it. A retail trader like you and me cannot influence the market. But in this story you will hear a story where a hedge big investor company suddenly was in a bankrupt position for an online community.
Let’s start the story.
Gamestop is a company where they sell physical video game DVD. But it was the time of online gaming. People can easily buy and install online games very easily. So they did not have a potential growth in future and their turnover will decrease drastically. A hedge big investor company thought the same. So they short the shares.
In simple term short share means you borrow some shares from someone and promised to give back after a particular time and sell the shares to someone else. You believe that those shares value will decrease and when it will decrease you will buy the share in lower price and give back to the owner. In between you earn the money.
But imagine that a company short a huge amount shares and the news spread in the market then what can happen. People will start buying shares for the particular company regardless the company ‘s fundamental structure or future. Market depends on supply and demand policy , as many people start buying shares the price will go up in place of going down. Now the company who borrow shares from another company have to give that amount of shares to that exchange which they borrow.
Now price of the share is high. So investor company can do two things. First is wait to going down the price of shares. But as news spread that a big company needs so many shares people keep investing in those shares. So now you have no option. You have to buy shares in higher prices and give back to the exchange. By this the investor company have to face a huge loss.
This thing happen to a hedge big investor who short a huge amount of sells of Gamestop expecting that the price will go down but a reddit group people somehow get to know this and they start trading the shares of Gamestop. When investor have no option other then buying shares in higher price they get a huge profit in shares and the investor company goes bankrupt.
A reddit group named wallstreetbets did the whole things which shaken the wall street financial condition and effect entire economy.
Some specialist accused that they act as a mob and tried to manipulate the whole market. They even accused an app named Robinhood where trading was promoting an gamble app. Some told that it was done because some people think the real culprit for which America economy crash in 2007 was getting benefit from that so they take revenge by showing that individual traders also can overpower the big investor company.
But we can conclude that in simple note that redditer mainly invest in the shares to earn money. Some big names inspire them to do that. It is reported some kids investing 60 dollars to 3000 dollars, some make million dollars investing few hundred dollars.