even if you're not into investing chances are you've heard about how a group of redditors have driven up the
stock price of the venerable gamestop gme in order to troll a bunch of hedge
fund managers although this is techwiki and not cash quicky we are going to give
you a brief synopsis of the situation for some context and then talk about the
tech side of things to better understand how this happened so the reason gamestop
was targeted was because it's a heavily shorted stock shorting a stock is a high
risk but potentially high reward play that works like this you pay a fee to
borrow a stock from the owner then immediately sell that stock like that
day you do eventually have to return the stock to the owner so by shorting it
you're betting that the stock will go down in value allowing you to buy it
back later for cheaper than you just sold it for giving it back to the
original owner and keeping the difference from the price you sold it for and the price you bought it back for
minus fees and interest gamestop is often shorted because with video game
distribution becoming digital gamestop's more brick and mortar
business model is seen as something that could fail in the near future you know
kind of like blockbuster but as we said shorting is very risky since if the
stock's price goes up instead of down
you have to buy it back for more than you originally paid for it sometimes a
lot more and as more and more people buy back a shorted stock because they're
panicked about the price rising even more it just keeps driving the price up
even more because of this risk stock shorting has become associated with
hedge funds which typically make high risk but potentially lucrative
investments for organizations or for wealthy individuals and some of the
risky plays they've made have hurt the u.s economy
meaning that they're not very well liked combine that sentiment with a feeling
that gamestop might be undervalued and the rush was on to buy gamestop shares
drive up the price and force short sellers to buy the stock back in a panic
making gamestop and even more lucrative investment at least for the short term
okay so we've explained a bit about how short selling works but how were a bunch
of individual investors on reddit able to beat these powerful hedge funds with
millions of dollars even bankrupting one of them a huge part of it is how online
services and apps have made investing far more accessible
instead of calling up a broker and using traditional trading software that
assumes the user is already familiar with investing newer financial tech or
fintech firms such as robinhood which we'll talk about more in a little minute
here have tried to make opening up investing to the masses with easy to
understand interfaces a core part of their business models there are also
companies that specialize in what's called robo advising an algorithm-based
approach to investing for those who don't know much about investments or simply don't want to have to manage the
details themselves typically you tell a robo-advising service such as betterment
or wealthfront what your investing goals are and how much risk you're willing to
take on and then the algorithms invest your money for you rejiggering things on
the fly depending on what the market's doing and oftentimes even making tweaks
that can reduce your liability come tax time robo advisors also have cheaper
fees than traditional brokerages due to lower overhead helping these services
take off big time over the last few years with many managing tens of
billions of dollars in combined assets and even though the aforementioned robin
hood doesn't offer robo investing it's easy interface and no commission trades
have made it very popular but you might
also have heard that robin hood has had a lot of ire directed at it recently
after the gamestop short squeeze we described robin hood made the decision
to restrict trades involving game stop stonks
as well as other stocks redditors were targeting robin hood reportedly did this
to limit its own risk in the event gamestop's price collapsed but the move
was extremely unpopular triggering lawsuits accusations from investors that
they were colluding with hedge funds and even statements from both republican and
democratic politicians wondering why hedge funds were able to trade
securities that individual investors suddenly couldn't wow it looks like
activist investing actually did something i wonder if we can rally tech
quickies fanbase to pump up the value of ltteststore.com but first we need to go
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