On Friday, January 8, 2021, the price of a stock that most people had never heard of suddenly began to rise.
Gamestop was the name of the company that suddenly held investors all over the world in suspense.
Editor in the "Money & More" department of the Frankfurter Allgemeine Sunday newspaper.
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Editor in the “Money & More” section of the Frankfurter Allgemeine Sunday newspaper.
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The Grapevine, Texas-based firm had nothing to show for a stock market success story.
On the contrary: Gamestop's heyday was in the noughties, when fans still made their way to the nearest store to buy the latest video game.
This was often a branch of Gamestop, since the company started out as a video game retail chain.
But who needs branches like this these days?
That was the uncanny thing about the price movement that started a year ago.
Actually, Gamestop's business model had long since lost all coolness.
Only nostalgic video game fans of the first hour seemed to mourn the loss, investors had previously ignored the share for years.
Small versus big
But from January 8, 2021 to January 28, in less than three weeks, the price rose by an incredible 2700 percent to $483.
According to data from the US Securities and Exchange Commission, almost 900,000 people traded the share at the end of January, which is also an astonishing value.
What happened there?
The world was able to watch a constellation that Hollywood producers could not have imagined any better (logically Netflix is said to be planning a film adaptation): Simple investors - a group that has hardly been credited with influencing market activity in the recent past - challenged stock market professionals.
A fascinating encounter.
How this challenge of the professionals went is technically a bit complicated, but in very simplified terms it happened something like this: Hedge funds are a special type of investment fund that can speculate on both rising and falling share prices.
At that time, there was hardly any other company that relied more on falling prices than Gamestop - for the reason already mentioned: A retail chain for video games no longer seems to be really necessary in the age of online trading.
Primarily younger investors who exchanged information via the social media platform Reddit opposed this speculation.
They agreed to buy, which sparked the huge jump in Gamestop's stock price.
This led to a situation that is known on the financial markets as a "short squeeze": When hedge funds realized that prices were developing completely differently than expected, this caused their portfolios enormous damage, which they urgently needed to limit.
Technically, this is only possible by buying Gamestop shares, which further increased the price increase.
The young investors, often martially dubbed the "Reddit Army," had beaten the pros at their own game, it seemed.
One year later
Today, however, the price is trading much lower again.
At that time, there were high hopes that the events surrounding Gamestop could also do some good things apart from the spectacle that the hype undoubtedly offered: a democratization of the financial markets, for example, and equality of arms between small investors and professionals.
Now, a year later, one has to state: in many respects the hype has given way to disillusionment.
But, and this is the good news, not everywhere.Keywords: