Gamestop, Robinhood, and college students have found a connection
by ALEXIS RIESBERG (LCTV)
On January 27, the stock market was the topic of the day. Unheard of news was occurring because the stock wasn’t able to be covered. Wealth individuals and companies shorted the falling Gamestop stock, while a lot of college students bought many shares of Gamestop.
When it comes to stocks, shorting is when someone thinks a company is valued more than they are worth. Essentially an investor is selling the stock first and then attempting to buy it later at a lower price. A group on Reddit called WallStreetBets, noticed this and capitalized off of it.
Reddit users bought these shorted shares on a stock-buying app ironically named Robinhood. Similar to the fictional character who took money from the rich and gave it to the poor.
GameStop’s stock rose 130% in a short period of time. The companies that shorted it were either going to have to cash out and lose their money or stay in and risk more money being consumed.
The investing app, Robinhood then prohibited buying any more shares of certain companies. Robinhood now is under fire for its actions. The organization’s reasoning is that they didn’t have enough money to cover the shares of the stocks. People were losing or gain an unprecedented amount of money.
Once sold, stakeholders received huge payouts. One company that had the biggest share in Gamestop sold their stocks for $2.9 billion. Many college students have invested as much as their parent’s mortgage into these stocks. One student even paid $23,500 of student loan debt.
Events like these are exciting. The payout seems larger than life. If you are thinking about investing in stocks, here’s some advice from Dr. Eller,
“If you can’t afford to lose it and can’t afford to think about it disappearing you should not be putting this money into these stocks. This is essentially like gambling. I mean it is fun, people go down to the casino, they make their bets and there is a possibility of a huge payoff. But just because you can get a big pay off, let say playing roulette, doesn’t mean you have a skill at playing roulette, you got lucky.”
This event has called into question the ethics behind the stock market. It also opens up who can be an investor. These events can be extremely risky though so don’t put all your trust in the Reddit world.