What Just Happened on Wall Street

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Abby Bozek

The Stock Market: something as complex as the electoral college. It’s difficult to fully understand it, and we (as highschool students) seemingly don’t have to pay attention. But then something happened — a Reddit threat changed the game.

If you are particularly fond of stocks and want an in-depth review of what just happened, maybe go to a different source. However, if you are a teenager who knows little to nothing about stocks like myself this article is perfect.

For background, hedge funds often short stocks; a process by which they lend stocks in hopes it will drop, and buy them back when they drop in order to engineer a profit. One Reddit thread, r/wallStreetBets, thought it a good idea to see which hedge funds were shorting stocks at huge margins. And to their delight, Game Stop seemed to fall into this category. A stock going for about four dollars at the time allowed all of them to buy a plethora of these stocks. So why is this a big deal? Well, by doing this the stock took an exponential turn. Instead of being valued at four dollars, they are valued at upwards of four-hundred of dollars as of yesterday.

What does this mean to the hedge funds? Well, they now have to pay the deficit (a ginormous sum of money). This is because instead of the stock going down to make a profit, it grew exponentially to make a huge loss. Hedge funds certainly aren’t liked by the so-called “little guy” in stocks, as they often get inside information as well as make plethoras of money off a system that is oddly legal. Due to this, this entire event can be seen as anti-hedge funds.

Some hedge funds claim they were able to buy back enough stocks to make up for it, but many may go bankrupt. Even billion-dollar hedge funds aren’t immune to the powers of a Reddit Thread.

The Reddit thread r/wallStreetBets has been shut down, as well as the app “RobinHood” (which many individuals buy stocks through), has stopped selling Game Stop stock. Many are attempting to sue RobinHood for this decision. Whether or not any of this is legal, as well as how many hedge funds have met their demise, is yet to be seen.