The stock market has been a long-standing hub of economic activity attracting myriads of people ranging from average, coffee-stained, 9-5 office workers to affluent, Wall Street stockbrokers. Throughout all the social intercourse that has taken place through the stock market, deals have been revolutionized, systems have been remodeled, and companies have floundered and flourished. The majority of trivial terms thrown around in reference to the stock market would baffle most Americans without any form of prior knowledge about the inner workings of the economy or corporate investment strategies. Yet, there are instances where average Americans still experience their own modern rags-to-riches stories.
Many Americans have started from the bottom and climbed financial ranks through investing with various, intrepid strategies such as time-sensitive investments or penny-stock investments. However, there are still only so many individuals who were able to independently, successfully enter the stock market without any past experience or financial foundation needed to abound a fortune. Most often turn away from stock trading when experiencing their first major loss, or some count their blessings and cash in on their profits, and then there are those who endure every loss and celebrate every profit for the long-haul.
Those persistent have found numerous, modern resources that are often dismissed as being solely for wasting time and have repurposed platforms like Reddit into breeding grounds of unique ideas and insightful techniques. Reddit had garnered the most attention for bringing in the most like-minded people who shared the common interest of getting rich quick. This sub-group of the media platform had daily posts, motivational videos, and educational recordings aimed to increase the stock-trading skills of each member on that platform. Many factors played into creating such a large stock-trading community- mainly that the platform is free to access and any individual can join to share whatever knowledge or begin any initiatives they had in mind. The group’s prospects of a gargantuan member count and easy access to other technology had significantly contributed to their market volatility.
On February 1st, one individual jokingly suggested that every member should purchase a share of the GameStop (GSE) stock to see what effect their actions would have on the stock market. In a short span of time, there was a spontaneous surge in the GameStop stock shares that had increased the average value of a share from around $20 to $60. Noting the impact of their investments, more and more members of this sub-group had joined and invested to partake in the feeding frenzy on the GameStop market shares. As more time passed, GSE piqued at the company’s record value of $90 per share. Although these profits may seem minimal, a single individual could buy multiple shares at minimal costs, and then sell those stocks at significantly greater values.
Although the resolve of the Reddit investors had tapered off a bit, hedge fund investors had incurred gargantuan losses in the billions. These investors virtually paid large sums of money to an investment firm that would determine where their consumers’ affluence should be pooled, and the effect of having incredulous sums of money in one stock would prevent other smaller stocks like GSE from attracting investors who were more interested in gaining large, immediate profit from stocks supported by hedge funds. These pooled-money shares had barred the likelihood for certain stocks to see profit, therefore setting up a “hedge.” What these Redditors had done was overcome the hedge fund barrier that would ward off people from investing and had thereby attracted more individuals towards GameStop and drew current/potential investors away from these hedge funds intended to bar stocks like GSE. As a result, numerous investors discredited the abilities of investing agencies specifically designed to restrain the profit of other stocks. Those individuals who had bought shares of the stock supported by hedge funds at absurd prices were now left with shares less than half of the original value.
All of this market activity was accomplished through the use of free, downloadable applications, most notably Robinhood which has been around since April of 2013 and has had governmental regulations up until now concerning Robinhood’s discretion with user data such as bank accounts and identification numbers. When government agencies such as the U.S. Securities and Exchange Commission (SEC) and Financial Industry Regulatory Authority (FINRA) witnessed the market volatility Robinhood had enabled through such easy accessibility to investors, Robinhood had to either face harsher penalties or disallow any further investment in the GSE stock among others.
Robinhood decided to bar any further investment in the GSE, and the shares of the stock once again plummeted to a meager $10. Robinhood has faced rightful backlash for restricting investors’ right to invest and handing a crutch to the hedge-investors to regain their losses. Although Robinhood is still facilitating investment opportunities for other stocks, most of its demographic are still at odds with its fiscal favoritism for the ultra-wealthy.
