GameStop is an American chain of stores selling game consoles, PC accessories and video games. The firm’s stock has been slowly falling in value over the past few years, making it popular with Wall Street short sellers. But a situation occurred at the end of 2019, when amateur investors were able to beat popular hedge funds, using only the group in the Reddit service in their hands. As a result, GameStop’s share price rose several times in order to play against investors. How this situation will affect the gaming industry in England, we will tell below.

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What Happened on Wall Street

Apparently it all started with Citron Research, an American financial research site specializing in identifying overvalued or manipulated companies. Except when the site announced in January that it was betting on GameStop’s fall, an army of stock marketers convinced the brand would grow bought shares in the video game distributor through options to capitalize on leverage.

With 5,000 stores located in malls, GameStop lost $ 275 million in the last fiscal year (on a turnover of $ 5.2 billion) due to the digital explosion and the pandemic that is devastating shopping malls for visitors. Nonetheless, small investors keep the company alive by posting support for GameStop on sites like Reddit. Tesla creator Elon Musk even noticed the effect of his tweet when he commented on the GameStop price hike, adding fuel to the fire.

Purchase action for entertainment

Stock marketers don’t invest in GameStop stocks, but rather have fun with this whole situation, accompanying their messages with emoticons. Some of these messages are actually scary, such as when one of the day traders proudly announces that he has put all his savings into GameStop.

In Wall Street parlance, these small investors are known as the “flock of sheep,” that is, those people who continually buy and dump stocks at the worst possible time. So far, however, stock marketers are the winners. GameStop’s shares jumped 92% in January, with 178 million shares sold, up from 14 billion for the entire New York Stock Exchange. One of the investors even noted his winnings in a video in which he dips chicken nuggets in champagne (he also explains his strategy there).

How GameStop Affected the Game Industry in England

Democratic Senator Elizabeth Warren, known as a strict adherent of tighter financial rules, said the stock market situation was due to constant distortions in real market prices. As a result, many rich people became even richer, were able to hike prices and make good profits, but the rest became even poorer.

Warren noted that the regulator should check and correct any deviations from the norm in the stock market so that it reflects the present situation, and does not develop into a bubble with stocks. This rule applies to both dishonest hedge funds and private investors who act to the detriment of large companies. In fact, this is an impetus for a change in legal and legislative measures in the stock market, which will certainly affect England.

What’s next: forecasts

Telsey Advisory Group has stripped gaming company GameStop of its “Above the market” rating, and renowned analyst Joseph Feldman downgraded these securities twice to “Worse than the market” with a target of $ 33. According to Credit Suisse analyst Seth Sigman, the minimum value for a GameStop share today is no more than $ 3.5.

The fears of large hedge funds are understandable, since the large increase in the value of securities is caused by the impulsive actions of private investors, and not by the fundamental achievements of the company. In the future, all analysts are waiting for a fair valuation of stocks, but it is difficult to say how long GameStop’s current position will last, as small buyers act in spite of funds. At the same time, due to the high speculative value at the current moment, the price of shares of a gaming company may either continue to grow or collapse sharply.

What’s next for GameStop promotions

The stock market in England and the United States knows many stories similar to the situation with GameStop. Situations in the world are increasingly occurring when social networks and thematic forums affect price volatility. From the point of view of fundamental analysis, such events in no way justify the rise in the value of shares, but at the same time they can become a short-term impetus to the growth of the movement of securities.

The market itself is plunging into chaos. Because of stories, when people with $ 50 thousand immediately received $ 20 million, people poured into the market to buy GameStop shares (which was once with bitcoins). Some even take out loans to buy back some securities for themselves. At the same time, there are no guarantees that the cost will continue to grow.

Experts believe that the situation will improve, as the growth of shares does not solve the main problem of the company. GameStop’s development concept is outdated, disc games are no longer interesting to anyone, so a drop in stocks is the norm for a gaming company. But the gaming industry in England and Wall Street will once again have to look at what happened and how to avoid it in the future. CNN officials announced that they shouldn’t underestimate the power of bored, quarantined millennials with Robinhood accounts.