What The Surge In GameStop Stock Could Mean For You
DALLAS (CBSDFW.COM) - Sranan Krishna spent years watching stock in Grapevine-based GameStop plummet. He bought his shares in 2014 for about $8,000.
"A long rollercoaster, but it went up!" he said.
In the midst of sudden surge, he sold it all two days ago for $19,000 and nearly hit a much larger jackpot. "I had it for like six years. One more day and I would have made like $40,000 more," he said.
Southern Methodist University (SMU) finance professor Don Shelly has been watching closely. "I've never seen like this in my lifetime and I've seen a lot of market cycles," said Shelly. Social media, he said, was key in allowing momentum to build so quickly.
Independent investors communicating on Reddit started purchasing GameStop shares, driving up the price. AMC Theaters, American Airlines, and Bed Bath & Beyond became hot commodities, too.
Hedge funds that had bet against the struggling companies lost large sums. "I think some of the wrong feathers have been ruffled on the institutional side," said Shelly.
Trading platforms, like Robinhood, intervened to try to stabilize the market by preventing their own customers from buying more shares of certain companies. It fueled a backlash.
"This is kind of seen as a David vs Goliath thing," said Shelly, explaining the anger among small investors. "Why are the institutions siding with Goliath? Because they're siding with one of their own."
Eventually, he says, those left holding the overvalued stock will lose their money.
A bigger concern is that this could be the first sign of a stock market ready to burst. "The pension funds, the hedge funds, the mutual funds.. if they start getting nervous and if some of their investors, bigger investors, start getting nervous, then you'll see some downward pressure," said Shelley.
For now, though, there are a good number small investors, like Sranan, who are walking away with a win. "I will probably try to buy something else," he says, considering his next stock purchase.
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