One stock that becomes the headline of the newspaper and price of this stock is increasing rapidly, known as GameStop. Is there any connection of the company to increase the share price, or is it automatically increasing?
You understand that some factors affect the stock price and investing, but it is not in the case of GameStop stock.
The cost of GameStop was 70 US dollars, but now the stock price is 183 dollars, reaching up to 375 dollars. So, in this article, we will see the reason behind the rapid growth of the price of this if there is no involvement of the company to increase share price. So let’s explore the GameStop stock. To have an access to Bitcoin Revolution Software, click chesworkshop.org/bitcoin-revolution/
GameStop is a famous American company that was started in 1984 by James McCurry and Garry M.Kusin. GameStop is a company that provides consumer electronics, video games, and gaming merchandise retailing services.
GameStop is a gaming company in the United States, and there are 4816 stores available; and they expanded their business in many locations such as Canada, Australia, newsstand, Europe. The stock price of GameStop skyrocketed for some reasons that we will discuss in detail in this article.
Price history of the GameStop stock
The price of GameStop stock in 2018 was 18 US dollars, and at this time, it was the same average rate of stock according to the company’s growth. On 2 January 2019, the price decreased to 15 US dollars, and in the first month of 2020, it went down by 10 US dollars, which means the cost of GameStop was 5 US dollars, which was very low. The game in 2021, the game of GameStop stock changes.
The stock price grew up to 325 US dollars, and the current price of this stock at the time of writing this article is 184 that normal because you know that the stock market is volatile. So, let’s learn the story of how GameStop reached up to 325 dollars from 5 dollars.
There would always be a factor behind the stock’s growth or the stock’s sinking, and short-selling was the factory that immediately increased the price of the game stock. Of course, some people will short-selling to earn a profit, but sometimes short-selling becomes the reason for the loss, and it is also in the case of GameStop shares.
What is short selling?
Before going further into the deep story of the GameStop stocks, we must first understand what short selling is. Short selling means selling the shares at the market price, and when the price goes down, purchasing the shares to earn profit. But how can we make a profit with short selling? Let me explain with illustrations for a better understanding of fast selling.
Suppose there is a company named XYZ, and the price of its share is 100 dollars. Now you can earn with two methods. The first is to buy its shares at the market price and hold until the price increases to 100 dollars, and when the price goes up, sell it or book your profit.
Many people use this method to earn money through the stock market, but short selling is the opposite. In short, selling, suppose you think the price of this XYZ company will go down and nowhere you can book your profit by short selling.
Suppose the market price of the share is 100 dollars, short sellers will borrow the percentage from a broker and will sell at the market price, i.e., 100 dollars when the price goes down supposed to decrease to 50 dollars then they will again buy the share and give back the claims to the broker. So, they have earned 50 dollars through short selling.
Hedgers want to short selling of GameStop stocks
Hedgers are the persons who trade the stock to earn money, and they also do short selling if they are unable to make money through trading or holding. So many hedgers wanted to short sell the GameStop shares and wanted to book huge profits. So, they start borrowing the claims from the brokers and start selling.
As a result, the price started decreasing on the GameStop shares. They do it until all the stock reaches a negative flow. Negative flow means there is low supply, but you are borrowing more shares.
Reddit users know that some hedgers are trying to short sell the game stock shares. Reddit users already discussed holding the shares until the hedger gets into trouble. So, they started buying shares when hedgers were selling. Now hedgers got into trouble because stocks were at a negative flow, and they had no more shares to sell.
So, the price of shares decreased, and when they wanted to buy shares to book their profit, no one was ready to sell since the credit forum’s famous group purchased all the shares. So, when the price started increasing, hedgers could not buy the claims, and they suffered significant losses up to 13,27,736 US dollars in short selling.