GameStop and the rise in shares, what really happened?

In the last month you have surely heard of the incredible case involving the well-known chain of video game stores GameStop, Reddit and even Elon Musk. The US company in recent years had in fact recorded an impressive decline in turnover but, in the last month, the value of actions GameStop has skyrocketed. With the help of the I invest, architects of the largest movement in Spain on the world of investments, we have analyzed the situation, to try to understand the reasons behind this "equity boom", and what will be the consequences of this situation, both in the long and in the short term. So let's try to recap what happened in the last period.

The American GameStop, listed on bag, is the world's largest retailer of video games and accessories, with over 6000 physical stores worldwide. As we all know, however, for better or worse, the video game market is increasingly moving towards the digital world, with DVD and Blu-ray less and less used, and with the fierce competition from e-commerce giants such as Amazon. To surround it all, then, we have the specter of the pandemic COVID-19, which made the shops impractical.

The drop in turnover, which had begun to impress as early as 2015, led to the conversion of physical stores into hub 2.0 who had given hope to the company and the title. However, COVID-19 has cut the legs to the project, which required longer times, e especially the title, exploited by the so-called hedge funds, the large hedge funds.

At the end of January 2021, it happens that a large group of investors come to an agreement on Reddit, the very famous social network where groups are created with people who have the same interests, to buy the stock en masse with shares and derivatives, in fact manipulating the price and forcing those who owned the shares to protect themselves, thereby buying large quantities of shares.

An undertaking that certainly does not go unnoticed and that comes under the nose of Elon Musk. The entrepreneur in charge of Tesla, in fact, decides to share the subreddit initiative on his Twitter account wallstreetbets and the game is quickly done: so much demand, the title skyrockets (+ 8000 %) with a phenomenon that in technical jargon is defined "Short squeeze". The four-digit price hike was a real gamble manipulation, so to speak: and the deviation from fundamentals and the real business situation and value went insane.

Gamestonk !! https://t.co/RZtkDzAewJ

- Elon Musk (@elonmusk) January 26, 2021

We then start talking about Gamestonk, a nice play on words that combines the name of the American company and the famous meme "stonks", a historical case, able to attract the attention of Wall Street and, more generally, all over the world, financial and otherwise. This does not mean, of course, that GameStop will become one of the most profitable companies ever, quite the opposite.

That what happened and what will happen is that all the poor investors who are buying now, in order not to lose the initial capital or as a speculation, will lose a lot of money, because the prices will return to the real value of the company around $ 10. It is precisely the IoInvesto team, at the end of our interview, that warns us:

In Spain everyone thinks that trading is easy, also because the different sites boast important earnings with zero experience. This is not the case and the growing success of our community proves it: financial information is basic, as well as useful and even fun. Trading is not a video game that you can start over with a new stash of lives every time.