The White House Is ‘Monitoring’ The GameStop Situation As Reddit Pushes Stock Even Higher
The White House says it’s ‘monitoring’ the GameStop-Reddit situation as the company’s stock continues to skyrocket.
Reddit is at war with Wall Street, fuelled by the 2 million-member wallstreetbets forum. Despite the complexities involved, it’s quite a simple battle between regular joes who never touch the stock market and the hedge funds and elite firms which often hold the power in the palms of their hands.
Yesterday, January 27, GameStop’s share price became a major talking point around the world, as expert financiers decried the ‘shorting’, while others seemed to relish the ‘pot kettle black’ aspect of their complaints – they play the stock market all the time, now others are doing the same. However, it’s managed to catch the attention of the White House.
Jen Psaki, the White House press secretary, said the GameStop-related changes to the stock market were being carefully ‘monitored’.
She explained: ‘Our team, our economic team, including Secretary [Janet] Yellen and others, are monitoring the situation. It’s a good reminder though that the stock market isn’t the only measure of the health of our economy. It doesn’t reflect how middle- and working-class families are doing.’
On January 21, GameStop’s shares could be purchased for $38.50 each. As of yesterday, the share price has increased to $347.51. How has this happened? A simple taunt from Wall Street.
Earlier this month, Citron Research tweeted that those buying shares from GameStop at higher prices ‘at this poker game’. Like other firms and major investors, Citron had shorted GameStop – in simple terms, it betted on the company to lose.
To short stock means to borrow it, immediately sell it and hope to buy again later at a much lower price, racking up sizeable returns. The Big Short is a fantastic film to learn more about the mechanics of Wall Street, revolving around shorting the housing market prior to 2008 – at the time, the most audacious bet of all.
Smaller investors took issue with profiteering from a company’s loss, especially during the pandemic, and its impact has been seismic. For example, hedge fund Melvin Capital Management required an investment of nearly $3 billion to keep itself stable as the company’s stock soared.
On whether new regulations are needed, NASDAQ CEO Adena Friedman told CNBC: ‘I do think that as we look at these new technologies that are available to everyone, including investors, I think it’s also important for regulators to understand that manipulation is manipulation, whether it’s happening through a new technology medium, or it’s happening through traditional mail.’
She added: ‘I think it’s just a matter of making sure that we understand what the behavior is, what’s underpinning the behavior, and working appropriately with the regulators to manage the situation, regardless of the technology that they’re using.’
Alexandria Ocasio-Cortez tweeted: ‘Gotta admit it’s really something to see Wall Streeters with a long history of treating our economy as a casino complain about a message board of posters also treating the market as a casino.’
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