Luca Pietro on GameStops Historic Run
Luca Pietro
GameStops Historic Run
Claims and stances
Transcript
- 0:00 So today I want to explain to those who may not understand in detail what happened to GameStop in 2021.
- 0:10 So GameStop, obviously they're a company, they sell video games.
- 0:14 They have a bunch of locations across the United States.
- 0:17 They sell video games, consoles, uh video game accessories, all that sort of stuff.
- 0:21 And so what happened with their stock is in within one week, the stock went up a ridiculous percentage.
- 0:28 And that's because a lot of people were short selling the stock.
- 0:32 And if you want to know a little bit about short selling, you have the lender who could be a mutual fund or some other entity like that, and then you have a broker, and then you have the person short selling.
- 0:42 So the person has to go through a broker to connect them with someone who owns the stock, and they temporarily borrow the stock essentially in hopes that the stock price goes down.
- 0:51 However, if the stock price goes up, uh the person who's short selling is going to be losing money because they have to pay margin as well on top of their collateral that they pay to the lender for borrowing their stock.
- 1:02 They also have to pay margin to the broker, and as the stock price continues to increase, they have to pay more margin to the broker.
- 1:08 So as a result, there's more retail investors purchasing up the GameStop shares because they have to buy more equity for the margin for the broker, uh resulting in upward pressure on the stock price.
- 1:21 So this all happened within one week, and GameStop just went nuclear.
- 1:25 So just a little background for those who don't know.