Why are investors buying GameStop shares again?

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GameStop actions have exploded again. The Texas computer game retail chain at the heart of the stock market drama in late January rose from a high of around US $ 44 (£ 32) to a high of around US $ 200 on February 26 before falling back to US $ 120 at the time of the launch. writing this article. Institutional investors who had “short positions” against the stock, that is to say they bet it was going to fall, would have accumulated nearly $ 2 billion in losses from the increases.

Other stocks involved in the first wave of the retail mania, like movie group AMC Entertainment, followed a similar trajectory, doubling at one point and still up nearly 50% from the calm of a few. days earlier. So why are investors buying these stocks again?

The army of millions of investors in Reddit’s WallStreetBets community pushed GameStop stocks from US $ 20 to US $ 480 during the January short squeeze, in which they led hedge funds like Melvin Capital to sell off. heavy losses, after forcing them to liquidate massive bets against the action. .

As the price of GameStop fell in early February, many of these small investors were counting their losses. There have been countless debates on mania since then, including a Congressional hearing in the United States on February 18.

The recriminations

Online trading apps at the center of the buying frenzy, such as Robinhood, have been repeatedly accused of making it too easy for amateurs to take wild risks, allow market manipulation, risk financial stability. system and to side with Citadel hedge funders by severely restricting the purchase of the stocks in question after the price spike.

On the latter issue, several users have filed lawsuits against Robinhood and Citadel, although according to a clause in Robinhood’s customer agreement, all disputes must be settled through arbitration and not through the civil court system. Robinhood CEO Vlad Tenev denied the allegations, offering his own explanation during the congressional hearing.

Keith Gill, the adopted leader of the WallStreetBets movement, also known as RoaringKitty and DeepFuckingValue
Credit: House Financial Services Committee /