How the Gamestop Stocks Fiasco is Starting a Conversation about the “Free Market”
Art by Avery Zakocs
At the end of January, the stock market and Reddit became the main thing we heard in the news, from our parents, and every libertarian around. But for those who didn’t pay too much attention, here’s a quick recap on the whole debacle.
In mid-December, some big Wall Street buffs and hedge fund managers all bet against Gamestop, which would result in them profiting, and leaving Gamestop most likely bankrupt, due to a “short cycle system” that many members of Wall Street are infamous for.
On January 11th some members of r/wallstreetbets on Reddit heard about this, and decided that they and other users could overturn the stock price, and, essentially, screw over the initial investors who bet millions that Gamestop would continue to fail. Lots of inspired Reddit users joined in on buying Gamestop stock shares, leading it to have an extreme increase in shares and gaining a whopping 22 million dollar profit within one week.
This caused stock sharks and finance companies to lose billions, giving the upper hand to a bunch of young people, for whom the majority, had never invested before and had no finance education.
This quick and unexpected change of course led to making the story sensational news throughout the United States, being a great story of how the underdog average man helped directly make some of the rich in our country lose a whole lot of money.
Soon after, trading for Gamestop, AMC, and other brands who were being invested in from Reddit,. were made unavailable to purchase on Robinhood, which had never happened before on the site. Robinhood is an app and website for commission-free stock trades, and investing. Robinhood stopped its users from being able to purchase these stocks since the company's top purchaser (of order flow) is the company Citadel. Citadel was directly affected by the unexpected increase, since their income is closely tied with Melvin Capital, a firm that lost about 53% of all their wealth due to attempting to short and take out Gamestop.
It is important to keep in mind that throughout all the years of intentional shorts and increases by these multi-billion firms and hedge fund managers, Robinhood shut down the ability to purchase ”meme stocks” (a stock being promoted to invest in on social media) for Gamestop, AMC, and all others mentioned on r/wallstreetbets from Reddit. Robinhood’s bias against the stocks manipulated by the average citizen has never been more prominent and is making it clearer just how manipulated the American “free market” is. Even a well-trusted stock-trading site shuts down the ability to bet in some stocks, solely to protect a company they have business with? A handful of lawsuits claiming trading violations against Robinhood are beginning to come up. This is helping begin the important conversation: why are hedge fund managers and wall street sharks able to short companies to extreme extents without punishment, not even a light slap on the wrist?
Upon further investigation, it is becoming clear for many Americans that if you are successful enough in the business of finance, your associates can and will go to extreme lengths to protect your money and reputation. And chances are when brought to court, the justice system will too. One can only hope that this fiasco will begin a moment of accountability and change in our “free market”.
Sources:
