GameStop’s Largest Shareholders Have Earned $2 Billion Thanks To Reddit ‘Meme Stock’ Surge
GameStop’s largest shareholders are up by $2 billion thanks to Reddit’s chaotic stock surge.
You’ll be seeing GameStop everywhere right now, even in countries it’s not a retailer. The salient facts are these: thousands of Redditors are playing the stock market against Wall Street investors and firms who tried to short the gaming company’s stock – aka, they betted on their downfall, but now they’re suffering losses.
However, for those shareholders who bought into the company way back when, before the wallstreetbets subreddit forum changed the playing field of the market, they’re in the money. This year alone, its stock has been boosted by 1,550%.
Look at it this way. When GameStop’s shares were around $40 each, anyone could have feasibly bought in. Now, they’re worth $347, so your investment has paid off even if you only bought two or three shares.
Think about the people who’ve invested millions, and that’s the happy happenstance for the company’s three largest stakeholders.
Ryan Cohen, the founder of online pet supplies retailer Chewy, used his investment firm to buy a 13% stake in the company for around $76 million. The 34-year-old’s stock is now worth more than $1.3 billion – according to CNBC, his wealth has soared by $90 million a day over the past two weeks, or nearly $4 million per hour.
Donald Foss, the 76-year-old founder and former CEO of Credit Acceptance Corp, also invested in GameStop last year – but crucially, didn’t short his stock – with a $12 million investment for a 5% stake. It’s now worth more than $500 million.
Finally, GameStop’s chief executive George Sherman, who already had a 3.4% stake in the company, now has shares worth around $350 million.
However, while regular folks taking Wall Street bigwigs to the cleaners may provoke a ‘hurrah’ from some, hedge funds are facing insolvency, and the market movement has attracted the caution of experts and the attention of both the White House and the Securities and Exchange Commission.
Steve Sosnick, chief strategist at Interactive Brokers, told The New York Times: ‘What happens in situations of stress is that people are forced to raise funds and that often means selling your winners. How does it end? Badly. Eventually, the bigger the balloon, the louder the pop. When does it end? I don’t know.’
Michael Hewson, chief market analyst at CMC Markets UK, also told The Guardian: ‘It is already illegal for institutions to coordinate in the manner currently being seen in moving prices on these stocks, raising questions about the legality of what is currently taking place right now on these forums.’
He added: ‘Regulators have already said that they are monitoring what is going on, raising the possibility of further action if it causes further market instability.’
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