By Kaleigh Cortez, News Editor-
The past two weeks have been a frenzy of small-time retail investors taking revenge against the professionals on Wall Street.
It all started on the Reddit blog, r/WallStreetBets, when users discovered that a number of hedge funds were short-selling GameStop stocks. In layman’s terms, they were betting on the stock prices falling.
These Redditors took to investing in the company by the thousands, driving up the demand and value of the stock.
This “short squeeze” grew GameStop’s share value from around $18 at the beginning of the month to over $300 per stock in the past three days.
The result: investors gained billions of dollars collectively and forced hedge funds to find bail-outs.
While this get-rich-quick scheme may sound tempting to join, UTC’s UC Foundation Professor of Finance, Dr. Christi Wann warns students not to jump on the bandwagon.
“I wouldn’t try to get involved with these types of things because you can lose a lot of money,” Wann said. “It’s like gambling in Vegas.”
She is wary of this bubble eventually bursting and investors being unable to sell their shares, stating “this can’t go on forever.”
Wann also gives a warning to some potential legal issues.
“To me, it sounds like price manipulation, which is illegal,” she said.
If social media continues to influence Wall Street in such an “extreme” way, “there needs to be rules about it,” Wann said.
Other companies were also influenced by WallStreetBets, but not nearly in the same magnitude.
So-called “meme stocks” such as Blackberry and Nokia saw surges in stock prices before falling again shortly after.
Robinhood, the app most traders used to purchase GameStop stock, is now facing a class-action lawsuit following their decision to close trading on a number of companies experiencing the jump in investments.
Redditors started a new blog, r/ClassActionRobinHood, to gain support for this move.