Q&A What are short positions?
Wall Street has been revolutionized for days by the phenomenon
GameStop
, a popular chain of video game and electronics stores whose shares lead to daily increases of around 50%.
The apparent
trolling
of a subgroup on Reddit called
WallStreetBets
appears to be behind the operation that is shaking up the orthodoxy of the American
trading
floor, although the case is more complex.
The story goes back a while.
GameStop's business model was based on physical stores and formats that digitization and lockdowns had led to a tightrope.
Its shares last March reached a
minimum of 3.5 dollars
, nothing to do with the
148 dollars
in which they ended the session on Tuesday after a new and meteoric rise.
Between one situation and another there are two names.
The first is
Ryan Cohen
, the founder of the online pet food store Chewy.com, who in GameStop's worst moment acquired a large number of shares and put pressure on its administrators to try to revive the business and bet on digitization.
The former leadership of GameStop accepted the challenge and brought in Cohen to carry it out.
The results began to be reflected in a matter of months and the shares rose from March lows to $ 17.25 at the end of 2020.
Only Cohen and a few others were confident of recovery.
On the contrary, a good part of
riskier
traders
,
hedge funds
and investors adopted bearish strategies and bet on the fall in value.
However, when the situation turned around and stocks began to rally, those same investors were caught in a vicious cycle to avoid losses and their reaction was to start buying stocks at increasingly higher prices to hedge their short positions. .
Added to the fears of these shareholders is the confrontation on social networks between the bears themselves.
WallStreetBets
Now is when we must introduce the second of the leading names in this story:
WallStreetBets.
It is a group within the Reddit social network formed by more than
two million users
that includes investors who are dedicated, among other things, to betting short.
Members of that subgroup organized to launch a
virtual offensive against other bassists
who have long been betting against GameStop.
The offensive is based, broadly speaking, on buying shares in an outrageous way to raise their price and, with this, cause millions in losses in those who took short positions to sink the value.
And at this point is now the phenomenon.
Experts agree that the movement organized by WallStreetBets has influenced the volatility of these days, although they also consider that it is not the only factor and that it is still too early to say how the virtual contest will end.
At the moment, hardly anyone seems to be on the sidelines.
In fact,
Elon Musk himself
, the founder of Tesla, wrote a tweet referring to the situation.
The episode also reinforces the theory of another group of managers who believe that a
new
investment
bubble
is brewing in
the heat of
speculation by inexperienced investors
.
His warning was picked up a few days ago by the
Financial Times
newspaper
in line with the high valuations that have long been installed in some indices and in some equity securities.
According to the criteria of The Trust Project
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