Is the Gamestop frenzy all about making a profit, or is it something more?
Words by ITV News Multimedia Producer Connor Parker
You've probably never thought about GameStop before, or even bought something from one of their stores, and yet for the past few days it's been at the centre of a social media frenzy causing headaches on Wall Street.
GameStop's stock price has soared by over 300% in the last week as amateur investors coordinated on social media to buy stocks for the struggling American video game retailer.
GameStop has been targeted by these investors due to the company being heavily shorted (bets that the value of the company will drop) by hedge funds.
As the stock price has risen so has the obligations the hedge funds are required to pay, to hold onto their positions, causing losses in the billions.
The drama has created a storm perfect for spreading quickly on social media as people around the world combined a desire to make a quick profit, with anger at perceived long-held injustices committed by Wall Street elites.
What is a short?
A short is the opposite of a stock purchase. When you buy a stock you are doing so in the hope that over time that stock's price will rise.
When you buy a short you are hoping the stock price will fall.
While there are many different types of shorts the core of it is you go to a broker, ask to borrow a stock of company X, you then immediately sell that stock on the market and wait until its price goes down.
Hopefully, after a bit of time, the stock price will have gone down so you can then buy another stock at a lower price and return the stock you borrowed to the broker while you keep the difference as profit.
Shorts are considered risky financial investments for several reasons, firstly while a stock can only go down to 0 it can rise infinitely, meaning your losses could be infinite.
Secondly, the contract you enter obliging you to eventually return the stock often come with regular fee payments that can increase if the value of the stock increases.
Thirdly, the contracts often oblige you to keep the value of the stock in a separate account as collateral because you have after all just sold something that belongs to someone else.
All of these three risks have combined to create a "squeeze" on the GameStop shorts.
When a stock is very heavily shorted, a rise in its price can force short sellers to get out of their bets. To do that, they have to buy the stock, which pushes the stock even higher and can create a feedback loop.
Hedge funds like Melvin Captial and others that bet against GameStop have lost more than $5bn (£3.64bn), according to data analytics company S3.
Where did it all start?
The alarming growth in Gamespot's stock price has been driven by the Reddit forum called WallStreetBets.
The page openly describes itself as a place for amateur investors to mock the ironies of the stock market and brush off large losses with memes.
WallStreetBets has seen a massive spike in recent days as people who know very little about the stock market joined the bandwagon in the hope of making huge returns.
The forum has committed to holding its position and not selling their investments in order to reach even higher value and cause pain for hedge funds they say have been making immoral investments for years.
They have committed to "going to the moon" before they pull out of their stocks, despite the price fluctuating massively.
At the core of the spike has been a few investors who noticed some hedge funds were overexposed on GameStop and rallied the community to invest in the struggling company.
Is it all just about making a profit?
Not really, while many of the people who have jumped on the bandwagon are doing so to make a quick profit, most of the original investors on the WallStreetBets forum have viewed it as an ideological fight against a Wall Street elite who have abused the system for too long.
The saga has upended Wall Street and sparked a flurry of complaints saying the market has been manipulated.
Seasoned investors and financial media have been struggling to explain the sudden interest in the stock market, particularly around a business that has suffered during the pandemic and questions hover over its future.
On the other side of the argument, the mostly amateur investors who have triggered the surge in price say they are simply playing Wall Street at their own game.
They say short-sellers often pile pressure on struggling businesses making it even harder for them to operate and eventually collapse, causing jobs to be lost while the hedge fund that made the original short reaps large profits.
Often when large amounts of shorts are placed on a business that in itself triggers a downward spiral of the firms stock due to the confidence of the investor that the company is not as in a good position as its market value suggests.
Several leading US politicians from both sides of the political divide have publicly backed the amateur investors' position.
How has a disparate group of amateur investors upended Wall Street?
The ability for groups of small-time investors to have such a huge impact on the stock market usually reserved for investment banks and hedge funds has been spurred on by a revolution in financial apps.
New apps like Trading212, Revolut, and Robinhood offer rapid trades to anyone who is interested, often for next to no commission.
The ability to access global markets from anywhere in the world and execute trades quickly and cheaply means the tools of the trade are now available to anyone.
Combining this with the power of social media has meant these apps have seen a huge spike in interest.
There was an outcry on Thursday when several of them restricted the purchase of GameStop's stocks.
They were accused of bowing to Wall Street's demands and being in the pockets of the hedge funds who wanted limit trades and stop the spiral in their stock price.
Facebook was also pulled into the row after it banned a group dedicated to amateur investors focused on the Robinhood app.
The interest in the Robinhood app has also helped the place where Robin Hood himself came from.
The Robin Hood Society based in the Sherwood forest has seen a sharp uptick in Twitter followers as people mistook them for the financial app.
Why are so many people getting involved?
Software developer and amateur investor Oliver Abraham told ITV News he had never bought a stock before the drama around GameStop developed but has now bought several.
He said he decided to buy the stock because "Reddit told me to" and thought it would be funny.
He added he didn't care too much if he ended up losing money on the investment.
"We're going to the moon and I don't care if I crash into the sun on the way," he said.