A social-herding investing philosophy is an investment construct which is unbounded and unconstrained by geography where people congregate on social media platforms, to herd investment in the stock markets, shifting pricing equilibrium points, not through fundamental elements of the affected companies or the economy, by rather, through a passion, anchored on the mechanics that the traditional capital market is a quasi video game platform, which with small funds from many people, can be played, for some to win and others to lose, creating ephemeral fun, for the participants.
GameStop continues to rattle the investing world. Shares of the beleaguered electronics-store chain jumped 68% Friday, bringing its gains this month to about 1,700%, thanks to a band of small traders who organized in a Reddit forum. Movie-theater operator AMC Entertainment experienced similar gains, with a 278% bump in stock price to end the week. While the David vs. Goliath tale of Reddit users vs. hedge-fund managers sent the markets into a tizzy this week, the aftershocks may be long-lasting, and questions remain about how trading platforms such as Robinhood handled the surging volatility.
Melvin Capital, a hedge fund, and which shorts stocks, lost 53% in January, hurt by GameStop and other bets. Some other short betters are receiving threats as some young people continue to see the capital market as a video game which must be won by all means.
Melvin Capital, a premier Wall Street hedge fund entangled in the frenzy over GameStop (), lost 53% in January, a source familiar with the matter told CNN Business.
Melvin, a major short-seller of GameStop, bet that the company’s shares would drop. But, on January 11, GameStop announced new board members who could help it with digital sales. That set off a fury on Reddit, namely subreddit WallStreetBets, which catapulted GameStop’s stock more than 1,600%.
Hedge funds like Melvin with huge short positions in GameStop and other stocks targeted by WallStreetBets got burned. The Reddit group specifically targeted stocks that were heavily shorted. At one point, GameStop had more short interest than shares on the market.
These guys are already distorting market systems and changing the market ordinance: “Some hedge funds that practice short selling, or placing financial bets against stocks, have already begun adjusting their operations. Prominent firm Citron Research said it will stop offering short-selling analysis after two decades of providing the service.”
Be worried because today they are playing to push a stock up, one day they can decide to take one down, creating distortion that will rattle markets.---
1. Advance your career with Tekedia Mini-MBA (Sept 13 – Dec 6, 2021): 140 global faculty, online, self-paced, $140 (or N50,000 naira). Click and register here.
2. Click to join Tekedia Capital Syndicate and own a piece of Africa’s finest startups with a minimum of $10,000 investment.3. Register and join me every Saturday at Business Growth Playbooks w/ Ndubuisi Ekekwe (Sept 4 – Oct 23, 2021), Zoom, 4.30pm WAT; costs N20,000 or $60.