Reddit GameStop phenomenon: Edinburgh investor speaks out after more than quadrupling investment

Two Edinburgh residents have made major gains after their investments reached over $30,000 by investing just over $2,000 in a ‘failing American video game shop business.’

This Thursday, Jan. 28, 2021 photo shows a GameStop store sign in Dallas. The online trading platform Robinhood is moving to restrict trading in GameStop and other stocks that have soared recently due to rabid buying by smaller investors. GameStop stock has rocketed from below $20 to around $350 this month as a volunteer army of investors on social media challenged big institutions who has placed market bets that the stock would fall. (AP Photo/LM Otero)

Both men – who asked to remain anonymous – got involved in the Reddit phenomenon to “teach hedge funds in Wall Street a lesson” by investing in the GameStop bubble.

GameStop is a collection of brick and mortar stores that was traditionally used for gamers to trade in hard copies for money or credit for new games.

For those unaware of the GameStop story, it involves a group of populist left and right wingers on Reddit who decided to invest in a stock that several hedge funds had bet would collapse.

GameStop store

This act by hedge funds is called short selling or shorting.

Short selling is a high risk advanced trading strategy often used by hedge fund managers or experienced individual investors willing to take on a potentially substantial risk of capital loss.

Short sellers take on these transactions because they believe a stock's price is headed downward, and that if they sell the stock today, they'll be able to buy it back at a lower price at some point in the future. If they accomplish this, they'll make a profit consisting of the difference between their sell and buy prices.

The shorting strategy happens when an investor borrows a security and sells it on the open market to those willing to pay market price, with a plan to buy the stock back later for less money.

The high risk strategy has the potential to bring in high rewards, however it also has the potential to incur huge losses.

This practice had angered many Reddit users who belonged to a page called WallStreetBets, which regularly targets Wall Street short sellers.

They see hedge funds as playing games with people’s livelihoods.

As a result individual daily investors have driven up the price of GameStop stock so that hedge funds would have to buy up stock at a much higher value than what they had originally envisaged - losing them billions of pounds and forcing bankruptcies in the process.

Although financial analysts are predicting that those investing will lose most of their money, the Capital duo insist that if they lose it all then it is all worth it to say to their grandkids “that I was there.”

One Edinburgh investor said: “I couldn’t take part in the Occupy movement because I didn’t truly understand it until much later. I bought in at $50 a share and before the markets opened on Thursday they were going at $420 - my friend got in at an even lower price.

“For me GameStop was totally undervalued as they have a new CEO who is looking to modernise the business. But I am under no illusion that I will probably lose my money, it is about the principle.

“I hope that this shines a light on how the stock market is no longer true capitalism but is instead an ugly mutation for the rich to get richer whilst gambling on people’s lives.

“My friend who got me into this has made $27,000 so far but both of us are riding this out to the moon and back.”

Some of those behind the bumping of prices have made millions, paying off student debt as a result.

But in an unprecedented turn of events on Thursday 28, trading platforms curbed the buying of shares in the US games firm GameStop as well as other companies such as Blackberry which had been targeted by individual traders on Reddit.

This has angered individual traders and has even united factions of the US Congress who are traditionally at odds with one another.

As left wing Democrat Alexandra Ocasio Cortez and right wing Republican Ted Cruz united in their condemnation of firms curtailing the purchasing power of individual traders in order to protect elite hedge funds.

Congresswoman Cortez said on Twitter: “We need to know more about the app's decision to block retail investors from purchasing stock while hedge funds are freely able to trade the stock as they see fit."

The Congresswoman added that as a member of the House financial services committee, she supports a hearing on the matter.

The move by platforms like Robinhood and Interactive Brokers to stop trading has followed days of chaotic trading that led to massive gains for GameStop.

And regulators are saying that they are monitoring the situation closely for illegal actions but the Reddit traders are adamant they are merely playing Wall Street at their own game.

The second Edinburgh investor said: “Rules for thee but not for me seems to be their motto.

“The second we started to beat them at their own game they changed the rules. Rules they made in the first place to allow them to win big.

“We know the market is going to crash. These companies are lying by saying they are trying to protect us, we know they are just trying to protect their friends on Wall Street.

“This is corruption and something that has never happened before. We will be removing our portfolio’s from the platforms that punished us for making a buck.

“We are riding this to the grave though, make no mistake.”

GameStop stock plummeted as much as 55 percent after restrictions were put in place for independent traders.

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