How A Battle Between Wall Street And Reddit Users Made GameStop Stock Skyrocket | Forbes
The sharp rise in GameStop and other stocks this week is explained by experts as a planned market riot.
«Many retail investors have yet to make a profit on the sale of stocks, and some platforms may later face frustrated clients who are too late in the race.», – said Larry Harris, former Chief Economist of the US Securities and Exchange Commission (SEC).
«However, for now, the big investors who own GameStop’s assets have an edge. As a rule, such market participants end up as winners anyway.», – he thinks.
This is in contrast to fans of the short position, who bet against GameStop in the expectation that the share price will fall, and later they will be able to buy securities at a lower value, making money on the difference..
GameStop, AMC Entertainment and BlackBerry Shares Soar This Week Amid Consensus From Reddit Users.
Many hedge funds, anticipating a decline in the shares of the aforementioned companies, were forced to urgently close their positions, which cost them billions of dollars and further exacerbated the situation in the markets..
But there were also those who took advantage of everything that happened. The Fidelity Low-Priced Stock Fund owned 2 million GameStop shares, which had a combined value of $ 1 billion. Yet at the beginning of January, this block of shares was estimated at about $ 33 million.
When asked by reporters if the fund could sell the shares now, a Fidelity spokesman said that in order to protect shareholders, the fund is not going to disclose intentions regarding any potential buy or sell decisions..
Large asset managers would also benefit from lending securities to retail investors and others.. These activities generated $ 7.66 billion in revenue in 2020, according to DataLend.. BlackRock top executive says its income from securities lending hits record high in 2020.
«As GameStop’s price rallied, so did the borrowing cost of its stock, in part because higher trading volumes made it harder to find securities.», – notes Sam Pearson, Securities Lending Analyst, IHS Markit.
Brokerage firms have also benefited from the growth in trading. Their volume on the American exchanges on Thursday amounted to 19.58 billion shares, compared with 14.86 billion in the last 20 trading days..
«The higher the trading volume, the easier it is for brokers to make money», – says a professor at Georgetown University James Angel.