The stock market is in turmoil Thursday, shaken by thousands of small-time investors taking on the big guys.
The stock market was in turmoil Thursday, shaken by thousands of small-time investors taking on the big guys. The investors, many of them college age, are banding together on the online forum Reddit and buying stock in struggling companies like GameStop.
Their actions are pushing the stock price way up, and that means big-time investors who bet the stock would go down, a trade known as short-selling, are losing billions of dollars. The explosion in GameStop's stock price is baffling, especially since the company, which sells video games and gaming consoles, is struggling like many brick and mortar stores. They lost $160 million last year and have closed hundreds of stores. So what's happening here?
“You’ve got these hedge fund managers that have taken positions where they’re betting on the stock to decline,” CNBC reporter Leslie Picker told Inside Edition “The stock didn’t decline, the stock went upward. And it didn’t just move upward a little bit, it moved violently upward. So what that does is causes hedge funds to feel some significant pain in their portfolios.”
Nick Brown, a senior at University of Arizona, is one of the young investors who took the advice of the Reddit community and bought six shares of GameStop two weeks ago for $180. His shares are now worth $1,600.
“I am shocked, because I didn’t know this could happen in such a quick amount of time,” Brown said.
J.P. Hurtado, a sophomore at the University of Illinois, turned an $8,000 investment into $60,000.
“It definitely feels good to look at my phone and see that nice big number,” Hurtado told Inside Edition.
It’s not just GameStop. The small-time investors are also targeting other businesses, including AMC, Bed, Bath & Beyond, American Airlines and Tootsie Rolls — all businesses that are struggling amid the coronavirus pandemic.
But their actions don’t come without risk.
“This is a very, very, very risky area, given some of the dynamics that are going on. You should not be taking your mortgage or what you plan to use to pay your mortgage and putting it in these names,” Picker said.
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