Will GameStop stock crash as quickly as it rises? Here's the full low-down
GameStop is caught amid a battle between short-sellers and amateur online traders which has caused volatility when it comes to dealing with the stocks of the video games retailer
GameStop's stock, at the moment of writing, was priced at $78.95. From being considered a company that was on terminal decline even until late last year after being priced at $20, the company's stocks have seen a volatile rise to the price that it is at currently. This is being termed as volatile because the upward trajectory can at anytime move downwards and very quickly at that. The reason why the stock prices spiked in the first place was when it was announced by GameStop that Chewy co-founder Ryan Cohen would be joining the board of directors. While the spike was not impressive, it was enough to have Citron Research publicly announce that they would advise anyone against buying the stocks of GameStop.
This then became an opportunity for online amateur traders, especially members of the Reddit group r/WallStreetBets to put short-sellers in a spot. So instead of selling the stocks after a reasonable hike and then buying it later when the stock price falls again, the daytime traders decided to buy the stocks that had seen a speck of a hike in price and inflate the price of the stocks to force the short sellers to buy the stocks again at a higher price only. In this attempt, the stocks of GameStop were bought so rigorously that the stock prices rose. In fact, it rose to such levels that trading had to be suspended multiple times on Friday. On January 25, the stock had risen up to $146.97.
While at the moment, the stock prices are on a high, this is high that GameStop cannot sustain too long just as amateur traders cannot continue to inflate the price or even keep it stable at the price that it is at right now. Serious stock traders are reportedly set to lose a lot of money were they to trade in these stocks and the only ones who continue to now hold onto the stocks are the ones who would want it for novelty purposes and the others are aware that this rise will come crashing down, but they hope to cut a clean profit before the crash takes place. According to the Reddit community, members are hoping that the price rises as much as $1000.
It must also be noted that the company had announced in 2020 that they were going to shut down hundreds of stores across the US. In fact, they might be operating at a loss in 2021 and this could also continue to be the case in 2022.