After hedge fund investors bet on stock of GameStop dropping, attention from a Reddit thread brought multiple people to buy shares- costing some investors over $5 billion.
CIO of Mercer Advisors, Don Calcagni, says this type of surge in a stock isn’t completely unusual, but the amount everyday people participating is.
“It was a group of non professional investors that actually took the hedge funds to the cleaners,” says Calcagni. “These folks said you know what let’s all buy the stock and push up the price. Which, in turn, hurts those firms who tried betting against the price.”
He says when the market sees a rush to one particular stock it can create a ripple affect.
Calcagni say, “When you get just a handful of buy or sell order it can really move the market and that’s really what happened here. And it moved it so much that the trading value in GameStop over the last couple of days was greater than the the trading volume in Apple and Tesla.”
But President of Intrust CPA, Jon Sluis, says because businesses like GameStop aren’t making large profits, they don’t have the potential to sustain the spike.
“There is not financial stability behind this. What goes up will come down,” says Sluis. “If you can lose it tomorrow, go for it but if you can’t lose it don’t do it. This is not investing this is just speculating, there’s difference.”
Sluis says many of the people who bought these short sell stocks may not know about what can happen long term.
Sluis says, “When you’re doing this you may not realize that there’s tax implications. So you go into this thinking the frenzy of I’m going to invest in GameStop for a couple of days, we’ll there’s tax implications that come with that.”
Both Calcagni and Sluis says this spike isn’t uncommon but what happened over the last few days has the potential to chance future trading regulations.
Tag: Stock Market