Across most of America, GameStop is just a place to buy a video game. On Wall Street, though, it's become a battleground where swarms of smaller investors see themselves making an epic stand against the 1%.
The funds serving the financial elite are starting to walk away in defeat. Big bets they made that GameStop's stock would fall went wrong, leaving them facing billions of dollars in collective losses. All the wild action pushed GameStop's stock as high as $380 on Wednesday, up from $18 just a few weeks ago.
Two hedge funds are bowing out of their short positions on the money-losing video game retailer GameStop. Citron Research’s Andrew Left said in a video posted on YouTube that his company is going to become more judicious in shorting stocks. Melvin Capital is also exiting GameStop, with manager Gabe Plotkin telling CNBC that the hedge fund was taking a significant loss.
The stunning seizure of power gives some validation to smaller-pocketed investors, many of whom are encouraging each other on Reddit and are trading stocks for the first time thanks to all the brokerages offering free-trading apps. It's also left much of Wall Street asking if the wildness is proof the stock market, which recently traded at record levels, is in a dangerous bubble about to pop.
Two investment firms that had placed bets for money-losing GameStop's stock to fall have essentially thrown in the towel. One, Citron Research, acknowledged Wednesday in a YouTube video that it unwound the majority of its bet and took “a loss, 100%” to do so. But Andrew Left, who runs Citron, said that does not change his view that GameStop's stock will eventually go down.
Melvin Capital is also exiting GameStop, with manager Gabe Plotkin telling CNBC that the hedge fund was taking a significant loss. He denied rumors that the hedge fund will fail. The size of the losses taken by Citron and Melvin are unknown.
Before its recent explosion, GameStop's stock had been struggling for a long time. The company has lost $1.6 billion over the last 12 quarters as sales of video games increasingly go online, and its stock fell for six straight years before rebounding in 2020.
That pushed many professional investors to make bets that GameStop's stock will decline even further. In such bets, called "short sales," investors borrow a share and sell it in hopes of buying it back later at a lower price and pocketing the difference. GameStop is one of the most shorted stocks on Wall Street.
But its stock began rising sharply earlier this month after a co-founder of Chewy, the online seller of pet supplies, joined the company's board. The thought is that he could help in the company's transformation as it focuses more on digital sales and closes brick-and-mortar stores. Its shares jumped to $19.94 from less than $18 on Jan. 11. At the time, it seemed like a huge move for the stock.
Smaller investors were meanwhile encouraging each other on Reddit and elsewhere online to push GameStop's stock ever higher.
The raucous discussions are full of sarcasm, self deprecation and emojis of rocket ships signifying belief that GameStock’s stock will fly to the moon.
“WHAT IS AN ACTUAL RATIONAL SELLING POINT, (ABOVE 200? 500?) SO I DONT HAVE TO WATCH THIS TICKER EVERY SECOND UNTIL FRIDAY/MONDAY????" one user wrote in a Reddit discussion Tuesday afternoon as GameStop soared. “I HAVE NO IDEA WHAT I’M DOING,” adding that they had other things to do.
In this Oct. 15, 2020, file photo, a woman wears a face mask as she walks past a GameStop store in Des Plaines, Ill.
There is no overriding reason why GameStop has attracted this cavalcade of smaller and first-time investors, but there is a distinct component of revenge against Wall Street in communications online.
“The same rich people that caused the market crash in 2007/08 are still in power and continue to manipulate the market to get even richer, we are just taking back our fair share,” one user wrote on Reddit.
“hey mom i can’t come up for dinner,” another user wrote. “i’m bankrupting a 10 figure hedge fund with the boys.”
Beyond personal attacks, the battle has also created big financial losses for Wall Street players who shorted GameStop's stock.
As GameStop's gains built and short sellers scrambled to get out of their bets, they had to buy shares to do so. That accelerated the momentum even more, creating a feedback loop. As of Tuesday, short sellers of GameStop were already down more than $5 billion in 2021, according to S3 Partners.
Much of professional Wall Street remains pessimistic that GameStop's stock can hold onto its immense gains. The company is unlikely to start making big enough profits to justify a $300 stock price anytime soon, analysts say.
Analysts at BofA Global Research raised their price target for GameStop on Wednesday from $1.60, all the way up to $10.
All the mania is raising some concern that investors are taking excessive risks, and reporters asked Federal Reserve Chair Jerome Powell on Wednesday whether the Fed's moves to support markets through the pandemic is helping to push stock prices too high.
Powell downplayed the role of low interest rates and pointed to investors' expectations for COVID-19 vaccines and more stimulus from Washington for the economy as drivers for record stock prices.
Meanwhile, some smaller investors online say they're already moving on to other heavily shorted stocks as their next targets.
AMC Entertainment Holdings Inc., the theater chain ravaged by the pandemic, saw its stock surge 285% Wednesday, and #SaveAMC was trending on Twitter.
6 video games to help you stay on track with fitness goals:
Ring Fit Adventure
Ring Fit Adventure for Nintendo Switch offers a way to get a fun workout at home.
Nintendo made home exercise waves years ago with Wii Fit, but if you ask me, it’s outdone itself this time with Ring Fit Adventure for the Nintendo Switch.
The main gameplay answers the age-old question, “What if, in order to attack enemies in a video game, you had to do a lot of squats?”
At first glance, the game just looks weird. The required “Ring-Con” accessory is just, well … a ring. It’s a flexible controller shaped like a steering wheel that you can tilt, squeeze and pull. One of your two Switch controllers goes into the ring while the other attaches to your leg with a Velcro strap, and the getup doesn’t exactly look like typical gym attire.
But the Ring Fit workout is no joke.
Through a series of fun mini-games and a sprawling role-playing adventure, you will work up one heck of a sweat by pushing, pulling and running in place.
Speaking personally, it’s some of the most fun I have ever had working out.
Beat Saber
Beat Saber
One of virtual reality’s shiniest gems, Beat Saber is an addictive rhythm game that lets you burn calories, enjoy great music and feel like a Jedi all at once.
Similar to games like Rock Band or Dance Dance Revolution, the point of Beat Saber is to hit specific notes in time with a beat. What makes this game unique, however, is that you are holding two (virtual) lightsaber-like blades with which you need to slash notes up, down, left or right. That’s a good enough workout for the arms, but your legs will get in on the action, too, as you duck and dodge your way past obstacles as songs play.
Beat Saber’s base game comes with a bunch of mostly original, mostly electronic music that you probably won’t recognize (though it’s fun to play through), but you can buy more song packs with hits from the likes of BTS, Imagine Dragons and Green Day.
Given that it requires a VR headset, this game has a higher barrier of entry than most others on this list, but I would go as far as to call it a must-have if you happened to get your hands on an Oculus Quest 2 over the holiday season.
Fitness Boxing 2: Rhythm & Exercise
Fitness Boxing 2: Rhythm & Exercise
Both boxing and dancing can be great ways to stay in shape, so Nintendo combined the two in Fitness Boxing and the new Fitness Boxing 2: Rhythm & Exercise. Taking a Nintendo Switch controller in each hand, you will jab, weave and uppercut various boxing-related icons in time with music.
It’s a bit simplistic and not as innovative or engaging as Ring Fit Adventure, but it serves its purpose and is easy to pick up and play for quick sessions.
One of the most disappointing things about Fitness Boxing 2, however, is the music. While the box boasts hit songs from artists like Katy Perry, Ed Sheeran and Ariana Grande, what you actually get are instrumental-only tunes that sound like they could have been the basis for an off-brand Kidz Bop album. It’s not a deal breaker, as the songs can still get your body moving, but don’t expect album-quality sound.
Just Dance 2021
Just Dance 2021
If your entire workout goal is to get moving with some popular music, the Just Dance series has been serving that purpose admirably for years. Featuring a wide array of current songs from artists such as Billie Eilish, Lizzo and Harry Styles, Just Dance is all about, y’know, making you dance.
If you’re playing on the Nintendo Switch, you can use the system’s included motion controllers, but you also have the option of connecting with your phone via the Just Dance mobile app, so just about anyone can hop in and play — for better or worse. The downside to this control method is that the tracking of your movements is less than perfect (and limited to just one arm, rather than your entire body), so Just Dance can often feel less like a game and more like an encouraging dance workout video.
Still, this hasn’t dissuaded fans. For diehards, there is also the option of a “Just Dance Unlimited” subscription, which grants access to hundreds of songs, with more added every month. You can even buy an Unlimited subscription for just a single day if you only want to pay for it when you’re hosting a dance party at your house.
Zombies, Run!
Zombies, Run!
This one will actually force you to leave your house, but it doesn’t require interacting with people.
Zombies, Run! is an old favorite for joggers who want to spice up their runs with the threat of a zombie apocalypse.
Using this smartphone app and a pair of headphones, you’ll be motivated to pick up your pace as the voice in your ear urges you to run faster to escape the undead horde at your heels.
It’s a clever concept that has stood the test of time.
Pokémon Go
In this Monday, July 18, 2016, photo, a "Pokemon Go" player shows his mobile phone while walking through the Boston Common, outside the Massachusetts Statehouse in Boston. (AP Photo/Charles Krupa)
If you’re not interested in running, dancing or strength training, it’s probably still a good idea to get outside.
And while you’re out there, why not use your phone to capture some pocket monsters, or get in your steps to hatch some eggs?
While the explosion of mainstream interest in Pokémon Go has mostly passed, the game remains extremely popular and continues to receive regular updates.
Whether you’re new to your Pokémon journey or have been away for a while, Pokémon Go is a pretty good albeit casual way to encourage yourself to take a walk.
