David Azzato says the Gamestop stock steep price rise has shown us the unexpected. We have seen how small day-traders on Reddit can influence the value of a company’s stock. Small traders started trading Gamestop stock. And it led to a steep rise in the value of the company’s stock within a few days. The change led to a halt in trading and problems for short-sellers betting against the stock. The price drop they were looking for did not happen and it kept increasing instead.
It began with a trader sharing the view that Gamestop stock was trading for less than its real worth. Then made a case for buying it. Buying at its current low price would earn them a lot when they can later sell at its true higher value. David Azzato points out that this is the philosophy that guides stock trading. Traders agreed the value of the stock was not what it should be and saw it as a good investment.
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Hedge funds managers had billions invested in Gamestop stocks. They thought that the stock price would drop and began selling. The small traders began buying Gamestop stocks and sent the price up. David Azzato explains that GameStop was not trading and was on and off Reddit for a few years. But the company was making changes. The direction it was taking was positive and pleasing to investors.
In an unfavorable environment, GameStop had some positives. The co-founder of Chewy had a huge stake in it and became a member of the GameStop board. There was also the possibility of the company going digital. These together with the belief that GameStop stocks were undervalued fueled trade. It caused a steep increase in the price of its stocks. Traders who bought stocks when the price was low and sold when it was at its peak made a huge profit.
Azzato advises that GameStop’s steep price increase is a rare occurrence. And it is not likely to happen with other companies. The market has remained stable. and is being monitored by the Securities Exchange Commission. The SEC has taken note of what happened with GameStop and wants to see the market keeps its stability.
David Azzato says the disruption from GameStop stock’s sharp rise is likely to result in changes. Companies will find new ways to do business. These may include restricting trades when prices begin to increase. Many may have to restructure their platforms. Or, they may have to change their methods to cope with the type of fluctuations experienced. Learn more: https://www.quora.com/profile/David-Azzato