Reddit messes with investors by driving GameStop stock price to record heights

It’s been a long time since GameStop had any real relevance for PC gamers. I used to love popping in and rifling through the bargain bins in search of sub-$10 boxes, but the rise of Steam put an end to that pastime ages ago. It was a slower spiral down for consoles, but the company has struggled for years to shore up its declining business. That’s been reflected in its stock price, which has slowly settled from more than $60 in 2008 to well under $10 since mid-2019.

A very strange thing happened last week, however. GameStop’s price very suddenly skyrocketed to nearly $120 per share. That’s odd enough in itself for a company that once seemed destined to suffer a Blockbuster-style fate, but what makes it even weirder is the central role that Reddit played in the whole thing.

(Image credit: Google )

The wheels actually started turning on all this last year. As reported by Wired, GameStop’s dire straits led some investors to “short” the stock. In a short, investors win if the price of a stock decreases. It works like this: The investor borrows a bunch of shares of a company and then sells them. At that point, they have a bunch of cash and no shares, but the shares weren’t actually theirs, and they eventually they have to return them. When that time comes, they have to buy back the number of shares they borrowed, hopefully at a lower price than they sold them for so that they earn money on the difference. The risk, of course, is that the price unexpectedly goes up instead of down, in which case the short-sellers lose money because they have to pay more to buy back the shares than they sold them for.



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