GameStop gamers risk real money on Wall Street
Paolo Pasquariello, professor of finance at the University of Michigan, will quickly tell you the end game for GameStop.
“This is going to end badly for a lot of people ,” Pasquariello told me Thursday morning shortly after trading began on Wall Street.
All the talk of how the little guy is making big bucks buying f or mer outcasts — like Game Stop, AMC and Black Berry—after researching the buzz on Redd it' s Wall Street Bets instead of reading the Wall Street Journal.
All of the talk about how a clever kid in a basement in Ohio can take on the nasty hedge funds in New Jersey.
Somewhere down the line, it all turns into tears and treacherous losses. And we might have seen a preview Thursday of how badly things can go.
GameStop was trading at almost $ 450 a share at one point Thursday after the video game retailer's stock closed at $347.51 a share on Wednesday — a gain of almost $200 a share or nearly 135% in one day.
But suddenly Thursday, Game Stop stumbled. GameStop lost $153.91 a share on Thursday, down 44.22%, to close at $193.60 a share.
The David versus Goliath story plays well, especially in political circles, but rich guys often finish rich on Wall Street. The rules of the game can quickly change — and not in David's favor.
“Some are calling this the` French Revolution of Finance ,'“said Sam G. Huszczo, a chartered financial analyst in Southfield.
“Rumors have it that Reddit's WallStreetBets board users are targeting companies to manipulate prices for profit and targeting hedge fund managers' short positions in an effort to put them out of business,” he said.
“Some view this as a redistribution of wealth, others as market manipulation. Either way, I don't envy the murky waters that the SEC will be forced to navigate ahead.” Who knew? GameStop? Many people hadn't even heard of or thought a minute about GameStop until a few weeks ago.
For many of us, it was just one of those retailers where we used to shop that has been shuttering stores. Many gamers now download online content; they're not typically bugging Mom to drive them to the mall to buy the latest video game.
GameStop's bullish run last week reportedly got firepower when Game Stop added Chewy Inc. cofounder Ryan Cohen and two former executives to the GameStop board. The objective is to boost digital sales.
Cohen cofounded the online pet food and supplies company, which has built quite a following, particularly among millennials.
Pasquariello admits that he first learned about the investing buzz about GameStop from his 16-yearold son Nico.
His son has followed trending news on Reddit about such topics as the presidential election, white supremacist hate groups, and now he's watching the stock market.
“When my teenage son knows more than me about financial markets, then something is not good ,” Pasquariello said.
I can relate, as my 22- yearold son Matt Burr, who is working from home, rushed out of his back bedroom office a week ago to tell me that GameStop stock had soared more than 70% in trading on Jan. 22 and trading was halted.
The young man knows numbers and news, so I rushed to write a column l ate Friday afternoon.
GameStop closed at $65.01 a share Jan. 22, up $21.98 a share or 51.08%.