In recent days from the various reviews about trading services in the US, the American financial markets grips by the saga of a video game retailer’s soaring stock price.
GameStop, which makes most of its money selling video games in stores across America, recently saw its stock price rise by 1,700 percent. It was backed up by supporters who believe that large investors who had bet billions that their stock would fall are unfairly undervalued. The stock rapidly increased in price, forcing large investors to spend billions of dollars to cover their losses, as small investors championed their purchases of the retailer’s stock in viral posts online.
The drama around GameStop’s trading has drawn scrutiny from Congress members, some of whom are calling for an investigation into the participating investors, businesses, and regulators.
What was going on with GameStop?
GameStop is a retailer facing the same pressures as many others in the United States, where shopping trends and the pandemic have led more individuals to buy goods online rather than in stores. Wall Street investors, believing that their brick-and-mortar business model is doomed, started betting heavily against the company months ago.
Not everybody has agreed. Several months ago, on the Reddit website, some famous stock market discussion group members began encouraging others to invest in the business. They said that the big investors had gotten it wrong and that GameStop was significantly undervalued.
More investors eventually bought in, and recently, as the conflict went viral on social media, additional investors keep buying into the company, fueling its rapid increase in market value. Careful analysis on US-Reviews investing review platforms shows that the increasing stock price was catastrophic for the large investors who had bet against it.
What is short selling?
A complicated, high-risk trading strategy that people always think twice before utilizing is what we refer to as short selling.
An investor borrows stock from a lender in short selling and then sells it to a purchaser at market value on the speculation that the stock will fall in price. They then repurchase it at the lower price, pocketing the difference before returning the lender’s inventory. They will make money if that happens.
What is Congress saying?
Following the market turmoil caused by volatile trading around GameStop, AMC, and other stocks earlier this year, Ohio Democratic Senator Sherrod Brown, said that he was planning to hold a hearing on “the current state of the stock market.”
“Wall Street people only care about the rules when they’re the ones that get hurt. For years, American workers have known that the Wall Street system is broken-they have been paying the price,” Brown said in a statement. “It’s time for Congress to make the economy work for everyone, not just Wall Street.
Democratic Representative Maxine Waters, chairwoman of the House Financial Services Committee, said in the United States House of Representatives that she planned to convene a hearing to examine short selling and other stock market practices highlighted by trading GameStop and other stocks.
“I will convene a hearing to access the recent activity around GameStop (GME) stocks and the affected stocks as an initial step in retaining the wrong practices. He continues that this is possible with a focus on short sales, online trading platforms, and their systemic impact on retail investors and capital markets,” Waters said in a statement.
Several Congress members also sought evidence for the Robinhood investment app, which severely restricted trading after the initial volatile GameStop trading earlier this year for a period.