GameStop Stock Rockets As Everyday Investors Cause Professional Traders To Lose Millions
NEW YORK (CBSNewYork) -- Everyday investors are inflicting pain on professional traders who made big bets that GameStop shares would fall.
Instead, it's rocketing higher, up 800% in a week.
Three weeks ago, GameStop was losing money. The entire chain was worth about $1 billion.
Now, the video game retailer is worth more than $20 billion, and big investors have lost hundreds of millions of dollars.
"Basically, people saying, 'Hey, a retailer of video games? Come on, that's not gonna last after COVID.' And they bet against it," CBS News business analyst Jill Schlesinger told CBS2's Tony Aiello.
Schlesinger says the so-called "short sellers," including big hedge funds, bet billions GameStop would fall.
That caught the eye and raised the ire of small investors active on the Reddit message board "Wall Street Bets." Many view Wall Street firms as greedy.
"They started encouraging other investors to kind of push back on those short sellers, buy a little bit of GameStop stock and force the price higher," Schlesinger said.
It worked. The price of a GameStop share rocketed from $17 on Jan. 5 to $347 at market close on Wednesday.
"If you're a short seller and the price of the stock goes up, you lose money," Schlesinger said.
RELATED STORY -- Is GameStop's Soaring Stock An Indicator Of Possible Market Bubble?
Prolific short seller Andrew Left posted on YouTube, saying he's learned a lesson about betting big that a stock would fall.
"We understand the changing dynamics in the market, so with that, we'll become more judicious when it comes to shorting stocks," he said.
Main Street teaches Wall Street a lesson, but Schlesinger urges caution.
"I'm worried that people are jumping into buying into these Reddit bandwagons and maybe they don't have the money to lose," she said.
The White House says officials are monitoring the GameStop phenomenon as Reddit investors target other struggling stocks, including AMC Movie Theatres.
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