Mike Barton
LE

An interesting story is emerging from the US regarding a "David and Goliath" battle between individual investors and the hedge funds.
To summarise there is a movement on Reddit and around such investment vehicles as Robinhood (bit of a clue in the name) to buy up shares in companies that the big investors have shorted, until such times as the investment funds are squeezed and they pull out of their short bets, with as big a loss as possible. It has come to a head with GameStop, a mall-based vendor that the big firms said was dead in the water and due to be finished off but whose stock price through massive investment by, for the want of a better term guerrilla investors, has suddenly soared leaving a couple of hedge funds nursing sore heads.
On the surface it all seems so heart-warming (at least in the way it is reported in the non-financial media) with the little guys standing up to Wall Street and giving the hedge funds a bloody nose and if the story ended there it would make a nice movie. But even the most novice of investor would ask the question, what next? So now the hedgies have pulled out GameStop is, apparently, the darling of the market, but nothing about the business fundamentals has changed. The Reddit forum is full of small investors crowing about how they have made enough money to pay for their college education. Good luck to them, I salute their shrewdness but that clearly means they intend to cash in, sell the stocks, so what happens to GameStock's price then?
My investments (such as they are) are in property and a modest pension pot so I am not personally into trading in stocks but I am aware that many people, especially during lockdown, are piling into day trading and the like. This story, presented in terms of ethical investing, strikes me as incredibly risky and just as prone to bubbles and severe market correction as any other form of market manipulation.
What do others think? Is anyone here involved in this sort of activist investing? How has it worked out for you? Are you comfortable taking long-term positions in this sort of strategy?
How GameStop found itself at the center of a groundbreaking battle between Wall Street and small investors
To summarise there is a movement on Reddit and around such investment vehicles as Robinhood (bit of a clue in the name) to buy up shares in companies that the big investors have shorted, until such times as the investment funds are squeezed and they pull out of their short bets, with as big a loss as possible. It has come to a head with GameStop, a mall-based vendor that the big firms said was dead in the water and due to be finished off but whose stock price through massive investment by, for the want of a better term guerrilla investors, has suddenly soared leaving a couple of hedge funds nursing sore heads.
On the surface it all seems so heart-warming (at least in the way it is reported in the non-financial media) with the little guys standing up to Wall Street and giving the hedge funds a bloody nose and if the story ended there it would make a nice movie. But even the most novice of investor would ask the question, what next? So now the hedgies have pulled out GameStop is, apparently, the darling of the market, but nothing about the business fundamentals has changed. The Reddit forum is full of small investors crowing about how they have made enough money to pay for their college education. Good luck to them, I salute their shrewdness but that clearly means they intend to cash in, sell the stocks, so what happens to GameStock's price then?
My investments (such as they are) are in property and a modest pension pot so I am not personally into trading in stocks but I am aware that many people, especially during lockdown, are piling into day trading and the like. This story, presented in terms of ethical investing, strikes me as incredibly risky and just as prone to bubbles and severe market correction as any other form of market manipulation.
What do others think? Is anyone here involved in this sort of activist investing? How has it worked out for you? Are you comfortable taking long-term positions in this sort of strategy?
How GameStop found itself at the center of a groundbreaking battle between Wall Street and small investors