NEW YORK (CBSNewYork) — Retail brokerage firms are now limiting trading on GameStop stock, which has been surging this month.
The video game retailer’s stock was suddenly soaring because it seems buyers wanted to hurt the big guys, and they succeeded.
In less than a year, the stock jumped from less than $3 a share to almost $350, though it tumbled Thursday on trade restrictions.
GameStop has been right in the middle of a new Wall Street game, one we don’t see very often.
“The little guy did well in this situation and the big guy, the hedge funds, are the ones who got hurt,” said Tim Ghriskey, with Inverness Counsel.
RELATED STORY — GameStop Stock Rockets As Everyday Investors Cause Professional Traders To Lose Millions
All last year, GameStop was struggling, its stock selling at less than $20 a share. Big Wall Street investors jumped in and they started “shorting” the stock, betting the price would drop.
That means that they’d make money on the loss, but if the GameStop stock rose, they would be the losers.
“It is competing against companies like Amazon,” said Stephanie Mehta, with Fast Company. “You can see why companies bet against it.”
That angered small investors, who used the Reddit forum to encourage others to buy, a so-called short squeeze, driving up the stock price dramatically and creating massive losses for those big-time Wall Street investors.
“Have we ever seen anything like this on Wall Street?” CBS2’s Dick Brennan asked Ghriskey.
“I’ve never seen anything like this before, specifically. I’ve seen big institutions do it, but nothing where a group of individuals got together, the little guys, did it and were successful,” Ghriskey said.
RELATED STORY — GameStop And The Stock Market: What’s Going On?
Jaime Rogozinski created the Wall Street Bets Reddit forum in 2012. He says small investors were happy with their market handiwork.
“There is something to be said about the fact that pretty much anybody can do it, too, and watching them do it collectively is certainly a show,” Rogozinski said.
As with all things on Wall Street, there is risk, and this case may be a lesson to people who want to sell short.
“For short sellers, you have to be very careful. If it’s a smaller company, if it’s a company that’s very depressed in stock price, you’ve got to watch out because buyers can come in very quickly and really hurt you,” Ghriskey said.
RELATED STORY — Does GameStop’s Soaring Stock Indicate A Possible Market Bubble?
Shares of GameStop and other affected stocks, like AMC Theatres, plunged more than 40% Thursday. This happened in part because firms have restricted the trading of stocks that ran up this week.
There is also backlash from Washington against restricting the trades with some lawmakers speaking out.
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