What does the GameStop buying spree tell us?February 15, 20212 min read
Villanova School of Business Assistant Professor of the Practice Keith Wright was in the chat rooms when individual investors were discussing pumping up the GameStop stock and forcing the hedge fund shorts to have to cover, losing millions of dollars.
“At the time David was clearly beating Goliath,” says Wright, adding that some of the young people on Reddit had already done extremely well. “They made significant money on their investments. Some of them were a little late, you don’t want to be the last one in who takes the position at the top.” He adds, "I have a feeling that this may actually be something revolutionary, and we’re seeing the bottom of the pyramid, which is Generation Z, the Millennials, the Robin Hood investors, really changing the game.”
"Going forward, you’ve got this group that's collaborating, and that makes them extremely powerful," says Wright. "If they all follow each other into a position, they can really move markets in any direction they choose. So, the question is: Are they powerful enough as a group to defeat the hedge funds? Now, maybe they win this battle and they lose the war. Or maybe they win this battle and they decide to try a couple of others. This is not the only occurrence, this is one stock, but it’s happening in a couple of other positions, as well."
As to whether a group of people like this can have this type of an effect on the stock market, maybe it’s a good thing, says Wright. "We live in an economy where wealth is very unbalanced. You have a lot of people at the very top who are doing extremely well. But there is some inequity, and these short sellers used to crush the average retail investor, but no longer. Maybe this will create some equity, and maybe it will even the playing field a little bit."