The Rights of the Deceased: Moral Rights Incidental to Copyright Law
- Vanshika Agrawal
- 2024-04-25
Gamestop crisis:
Before understanding what exactly has happened in this entire event and with the stock price of GameStop let us first
understand the concept of Short Selling, Short Squeeze, Free float, Market- wide position limit.
Short Selling: –
When the traders are speculating that the price of a share will go down in the future, he can borrow the stock from his broker and sell them in the current market, and later when the price will go down he will buy the same stock at a lower
price and will return the stock to his broker, in this way he will end up earning profits.
Short Squeeze: – When instead of going down the share price goes up due to sudden increase in demand then to limit the loss the shorter will try to buy the shares which in turn will add only to the upward pressure on the stock price and
the share price jumps sharply.
Free float & Market wide position limit:- Let’s say a listed company is having 1000 crores worth of shares
(market capitalization) out of which 500 crores worth of shares are being held by the promoters, the remaining 500
crores shares are known as free float, certain percentage(which is decide by regulators depending upon the market
volatility) of the free float shares are known as Market wide position limit.
Game Stop Crisis: Merely a Short Squeeze or Virtual Mob Lynching?
For those of you who don’t know GameStop is a popular consumer electronics and video game retailer based in the US. As a friend of someone who has bought video games from GameStop i can says it’s one of the worst in terms of
deals and all of the less popular alternatives which sold video games had better deals at any given time. But even if
we are considering that buying at GameStop was never a good deal, hammering it’s stocks to the point of making profit on it’s lows and ups and drowning the private investors’ money is although legal but is morally wrong and that’s why it
sparked the ire of reddit users, most of whom have never invested in the stock markets before. They didn’t do it for money either! They did it out of spite and that’s what occurred in the recent days.
The reddit users which mostly comprise of nerds, geeks and gamers had enough of the big shot Hedge funds owing millionaires and collectively decided to dry them out by buying GameStop’s shares with their own money which
created a ripple effect and ended with Robinhood (the financial services company) blocking the buy of any more GameStop stocks. Based on what happened GameStop was the most apparent example of the hedge fund owners manipulating the American stock market. These reddit users basically had enough and they decided to that also want a
slice of the pie too and now we are here with GME (GameStop) rising over 2000% within 3 weeks.
Melvin Capital which has shorted the GameStop stock heavily ended up losing 53% of its capital by the end of January. On January 26, it was report that short sellers lost a total of $6 billion due to the squeeze.
By carefully analyzing the entire event it has already been clear that the motive of the online mob was not to earn profit but to take revenge from those Institutions which they believe were responsible for the 2008 Global Market Crisis
as many Hedge Funds were heavily shorting the market when it was souring at all-time high at that time. Whatever has
been done in this case by both the parties is completely legal or in other word one can say A Hedge fund that used to
rob the retailers since decades are being defeat in their own game by the retailers.
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GameStop Crisis: Merely a Short Squeeze or Virtual Mob Lynching?
Hedge funds, Institutional Investments are basically being manage by the people who are probably some of the
smartest people on the planet, seeing these institutions on the verge of bankruptcy due to the collusive action of
online mob is absolutely not normal. These large Institutions are being fund by various banks and if this activity are being done repeatedly by these online mob who doesn’t have any idea about how economy works and what will be the long term consequences of their course of action, and the Hedge Funds or Institutional investors starts getting bankrupt then it would not only affect the banking system but the entire economy will go down and we may witness a
financial crisis even worse than that of 2008.
This could happen in India as well, as our population is more than four times than that of US. Even though SEBI restricts the shorter by revising the Market Wide position limit from time to time which I feel is only effective till the retailers are not fully aware of the positions held by the Institutional investors. As more and more number of retailers
would join the Indian market then probably we may see the Indian market getting dominate by the Retailers instead
of Foreign Institutional Investors or the Domestic Institutional Investors.
GameStop Crisis: Merely a Short Squeeze or Virtual Mob Lynching?
It cannot be denied that the US market decides the course of direction of the market of other developing countries
and it has already been witness during the Lehman Brothers Bankruptcy. The regulator should focus on this issue
and should take such step so that this kind of activity would not be repeat again as this will not only affect the US
market but it will have serious impact globally.
A word of caution don’t mistake it for ”capitalism vs. the small guys”, In my opinion, it’s a false parallel create by people who have little sense of economics, they don’t understand that there is a big difference between capitalists entrepreneurs, who create competition sometimes by merely existing, as opposed to corporations which comprises of a collective collage of people and if history is any example they have done anything and everything to snuff out their
competition by any means necessary instead of inventing or innovating out of necessity.
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