Daily Market Recap -The GME Sensation

What began as an absurd battle between Internet users with dubious humor and major American investment funds is gradually turning into a political debate on the stock market and a national affair.

On Thursday, January 28th, while GameStop's (GME) share price continued to explode on the New York Stock Exchange, the American authorities were forced to express themselves on an affair that now panics some observers of the financial sphere but amuses many Internet users on social networks.

In recent months, large American investment funds have tried to make money by betting against the GameStop company. They did what is called “short selling”: they borrowed shares they didn't own, sold them at a high price, and waited for the price to drop before buying them back at a low price and returning them to the entities they borrowed from.

But their strategy did not work, as the GameStop share price rose thanks to a community of amateur traders gathered on a discussion forum, r/WallStreetBets. Believing that it was possible to get rich betting on a rising share price, but also to trap large institutional investors on Wall Street, they coordinated to buy GameStop shares and drive up the value of the company.

The main loser seems to be Melvin Capital, a major U.S. investment fund that had sold GameStop shares short betting on the company's declining price. On Wednesday, Melvin Capital threw in the towel and bought back all the GameStop shares sold short, accepting the colossal losses that resulted. According to the Financial Times, the investment fund lost about $3.75 billion and was forced to seek help from other investors.

(Yes youre reading it clearly. 715% in gains from last Friday to its peak this morning)

(Chart Source: Tradingview 28.01.2021)

After a tumultuous week of frenzied trading, brokers such as Robinhood have begun halting the trading of GameStop in an attempt to thwart the strategy of Internet users. Shares in GameStop have indeed suffered as a consequence though it is likely that the community will be looking towards its next target in the coming days, which could very well be any of the following:

-AMC Entertainment (NYSE:AMC)

-BlackBerry (NYSE:BB)

-Bed, Bath & Beyond (NASDAQ:BBBY)

-Express (NYSE:EXPR)

-Koss (NASDAQ:KOSS)

-Marque Naked (NASDAQ:NAKD)

-Nokia (NYSE:NOK)

Disclaimer: This material has been created for information purposes only. All views expressed in this document are my own and do not necessarily represent the opinions of any entity.