Reacting to heavy-wallet hedge fund investors shorting the stock, a group of young people on social media decided to fight back and buy into failing companies. These companies, such as GameStop and AMC, saw exponential increases in value.
Lipscomb advertising major Ryan Lusk was among those who joined in. Lusk bought stock in GameStop last week; he ended up holding out through the drop and lost around $9.
“Now that people are aware that the internet has the power that it does to a new degree, and that putting our money into something and all of us mobbing together I think it’s really fun and that it will definitely benefit less wealthy people,” said Lusk. “I love the culture of people unifying and uniting online and stuff. I think it’s cool.”
“It is very interesting, ” said Lipscomb associate professor of finance Julio Rivas. “It is something that has not happened before because nowadays we have a lot of tools that we didn’t have in the past. It is relatively easy, you have an app on your phone and ‘click, click, click’ and you now own shares of stock in GameStop.”
Rivas said he appreciates how this headline-grabbing stock event has led students to gain interest in the stock market but warns against potential risk.
“A lot of people can make a lot of money, but you can also lose a lot of money. I think the biggest lesson here is about risk,” he said. “Regardless of whether events like this happen again in the future, we need to be aware that there is a lot of risks involved.”
The trading app Robinhood decided to block purchases from their app when they realized what was happening. This decision, in defense of those with hedge funds who were suffering major losses, has led to many questions about the free market and those involved.
These events may very well lead to major changes in the way social media and the stock market are connected in the future.