There is something wild happening on Wall Street.
All week several companies thought to be dead in the water because of the pandemic, like GameStop and AMC movie theaters have seen their stocks jump through the roof.
Here’s the twist: It’s mostly caused by social media.
Hedge funds and shorts
This started with several large Wall Street hedge funds (an investment firm that specializes in complex trading) seeking out troubled companies like GameStop, the video and computer game retail store, and AMC Movie Theaters.
The hedge funds see the stocks aren’t doing well, in large part because of the pandemic. Their investors basically make a bet that the stocks will continue to go down.
It's legal to do this on Wall Street. The process is called a short. (You may remember the movie The Big Short is about betting against the housing market in 2008.) In shorting, if the stock plummets these hedge fund companies stand to make millions.
A few hedge funds were going to do that with the video game store GameStop. It is a practice that quite a few people disagree with including our stock market expert Peter Ricchiuti.
“The [stock market] game has always been a game, but we've never had the little people and social media,” Ricchiuti said. #WakeUpCLT #GameStop #GME
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