Okay, I take a lot of pride in understanding the news I report. I try not just to read the words as they go by on a teleprompter. With all that said, a story this week caught me totally off guard and unprepared.
GameStop. Yes, GameStop! Are you following this story about its stock price? The David and Goliath fight between the little at-home investors and the big hedge fund guys.
So… I have had to do a crash course in what’s going on here in the stock market.
First of all, it really comes down to one word: GameStop. It really is one word. That’s the easy part.
The Washington Post has a piece called “What you need to know about GameStop’s stock price chaos.” It’s a good explanation of things.
Essentially, GameStop has been struggling, and investors on Wall Street have been taking advantage of that. They have been betting against the company doing something called short selling.
Short selling is when an investor borrows a stock to sell it quickly. Then, they wait until the price drops. When it does, they buy it back. The investor returns the stock to the owner and pockets the profit.
It’s a risky business. What if the price doesn’t go down but up? The investor has to cover the increase.
That’s where we are. Regular investors have driven GameStop’s price up—way up. The big investors are not happy. The little guys are having a swell time. David hit that rock right between Goliath’s eyes. Boom. A knockout.
Well, maybe not.
The fight isn’t over. Nowhere near. Government regulators are watching closely as this plays out. Probably stepping in.
Already, GameStop’s stock has started to fall. Some online trading sites have limited how much stock can be bought. These regular guy investors are mad. Can’t blame them. I’m kinda rooting for them.
Should I be, though? The stock market has been all over the place this week because of the short selling. That’s the tough part. Everyone else is in the middle. Those that have 401k’s. We are watching the fight from the stands. Who do we cheer for?
I’ve written my way through this. I’m starting to get it. I’ve got a ways to go yet, but at least I can talk about it. Or, at least I can fake it on TV. Please don’t make me “really” talk about it.