What's Happening on Wall Street & What You Need to Know
HERE IS A BRIEF BREAKDOWN ON WHAT’S HAPPENING ON WALL STREET:
WHAT’S ROBINHOOD? WHAT’S GAMESTOP? WHAT’S REDDIT?
— I’m glad you asked. In order to understand what’s going on on Wall Street it’s important to know the key players.
RobinHood is an app that allows you to do commission-free stock trading and investing. From their site, “at Robinhood, we believe the financial system should be built to work for everyone. That’s why we create products that let you start investing at your own pace, on your own terms.”
GameStop sells consumer-related electronics. “[GameStop]is a digital-first omni-channel retailer, offering games and entertainment products in its over 5,000 stores and comprehensive e-Commerce properties across 10 countries. GameStop, through its family of brands, offers the best selection of new and pre-owned video gaming consoles, accessories and video game titles, in both physical and digital formats.”
Reddit is an online community where you can share news, make threads, and indulge in topics you find interesting. “Reddit is home to thousands of communities, endless conversation, and authentic human connection. Whether you're into breaking news, sports, TV fan theories, or a never-ending stream of the internet's cutest animals, there's a community on Reddit for you.”
OKAY…SO WHAT’S HAPPENING?
—Long story short, GameStop’s stock went up about 8,000 percent over the past six months and has made a riff between everyday investors and hedge funds. Since hedge funds rely on companies doing poorly, there has been an upset to them due to a forum on Reddit making GameStop a hot topic. When a company begins to get more attention, stock prices go up and those who have made investments in the company's demise (hedge funds), then they lose out on a lot of money.
SO…HOW IS ROBINHOOD INVOLVED?
—Well, the issue with RobinHood is that they stopped allowing users to buy more stocks. Taking a new meaning to a “free trade market.” In an interview with CNBC, CEO Vlad Tenev stated that it is for the best interest of the customers and firms to limit buying of this stock. Tenev also stated, “Robinhood is a brokerage firm, we have lots of financial requirements. We have SEC net capital requirements and clearing house deposits. So that’s money that we have to deposit at various clearing houses. Some of these requirements fluctuate quite a bit based on volatility in the market and they can be substantial in the current environment where there’s a lot of volatility and a lot of concentrated activity in these names that have been going viral on social media.”
SO..WHY IS EVERYONE OUTRAGED?
—Naturally, people took their frustrations to social media (and rightfully so) to engage with others on how this is an attack on the free market and how this kind of restriction is attacking everyday investors who statistically have lower financial buying power.
SO...WHAT DO WE DO NOW?
—As of right now, trading has resumed on purchasing stock from GameStop but, what just happened on Wall Street is proof when everyday investors begin to manipulate the stock market (how hedge funds do everyday), investing apps are enforcing restrictions only to the detriment of the people.
Take a look at social media posts below: