What next for the retail investment frenzy?
2021-02-04 | CGTN
While the GameStop bubble is starting to burst, the phenomena of retail investors coming together online isn't going away.
The stock market frenzy around the U.S. electronics company pitted hedge funds against individual investors brought together on social media site Reddit and this seems to be the tip of the iceberg, with stock "activism" spreading to other businesses and asset classes – there have been Reddit-driven spikes in BlackBerry, AMC Entertainment, Bitcoin and the commodity silver.
The individual investors, called "retail investors," purchased GameStop shares en masse. That pushed up share prices more than 1,000 percent in two weeks and left one particular hedge fund called Melvin Capital with huge losses.
Melvin Capital had been "short selling" GameStop. "Shorting" is a process by which hedge funds borrow shares in a company they believe is failing, sell them immediately, wait for the value to fall, then buy them back – pocketing the difference.