How High Will GameStop’s Stock Go? – Bet on the Stock Reaching $420

The internet is a remarkable place. On Monday, a group of users on Reddit decided to play games with Wall Street. GameStop, a national video game retailer whose performance in the stock market can be best described as “middling” over the years, has seen its stock price skyrocket over the past 48 hours.

Reddit users in the forum WallStreetBets decided to try to boost the value of GameStop after initially discussing the idea last week. The users decided that they could ultimately force the market to rally by artificially creating a demand that had not previously existed.

As a result of the deluge of new activity, GameStop’s stock price has risen by an incredible 822% and counting as of this writing on Wednesday morning. The company’s stock cost $17.25 when the calendar flipped to 2021. By the end of Monday, a share of GameStop stock would cost you $159.18. The price dipped slightly to $147.98 on Tuesday before Tesla CEO Elon Musk took to Twitter:

The price leaped another 40% following Musk’s Twitter missive. As of Wednesday morning, GameStop’s stock price was idling around a whopping $315 per share. Other Reddit users have since turned their attention to struggling movie theater chain AMC and communications company BlackBerry in an attempt to do the exact same thing.

What Happened?

The users at WallStreetBets essentially gamed the stock market system by creating a demand for GameStop’s stock by flooding the market with their own cash. The WallStreetBets forum is home to over two million users, so this is clearly no small operation.

Stock prices rise if traders buy up lots of stock in a company in a short span of time. We see this kind of movement all the time with various companies on the stock exchange. However, GameStop has been a popular target for short-sellers in recent months. Traders that do not believe GameStop has much long-term viability are selling that stock as soon as possible before it loses even more value. Short-sellers are gambling on the idea that the stock’s price will drop instead of rising in the future.

The Reddit users are keenly aware that short-sellers have been bailing on GameStop by the boatload lately. So, by artificially forcing the stock price to rise, the Redditors are also forcing those same short-sellers to frantically buy back stock in the company in order to try and offset their losses. By forcing short-sellers to do so, the stock price rises even more rapidly.

Short-sellers got absolutely crushed thanks to the renewed interest in GameStop’s stock. As of Monday, they had reportedly lost in excess of $3 billion so far this year by betting against GameStop. Nearly half of those losses came Friday when GameStop’s stock price rose by over 50%. GameStop was one of the most-shorted companies on the market to begin 2021.

What About AMC?

AMC and the entertainment industry all over the world has been hit hard by the pandemic. Movie theaters are closed in many places as people are being advised against gathering indoors. There is the real risk that many will go out of business soon if they haven’t already.

However, Redditors are trying to pull the same stunt with AMC that they have with GameStop. Shares of AMC’s stock were up over 230% on Wednesday morning as the hashtag #SaveAMC started to trend on Twitter. As you may have expected, AMC has been another very popular commodity among short-sellers amid the company’s struggles over the past year.

AMC said publicly late last year that the company may not be able to survive. However, as a result of the unforeseen influx of cash, the company’s outlook is looking a bit more optimistic. AMC CEO told CNN Business on Tuesday that there is a good chance that the company will be able to stay afloat as the pandemic (hopefully) nears its end.

Can I Bet On This?

You sure can. Financial betting sites like MyBookie have noticed the flurry of activity around GameStop, and the good people over there are now offering you the chance to bet on whether the trend continues. MyBookie has a prop asking whether GameStop’s stock price will exceed $420 per share by the time April 20 rolls around. The “yes” side of the bet checks-in as a -160 favorite, while “no” pays out at +120.

As of now, there is no reason to believe the soars will slow down any time soon.

The increased popularity of retail investing has made it easier than ever before for anyone to buy and sell stock. You don’t need to employ an expensive stockbroker in order to tell you what to do thanks to fee-free apps like Robinhood. The social media aspect is also important. A huge swath of people is rallying together for a common cause and compelling others to do the same. Plenty of Redditors are doing this to make easy money, while others are framing it as a revolt against the powers-that-be on Wall Street.

A number of trading platforms have reported issues as a result of the surge in activity. TD Ameritrade, Vanguard, and Charles Schwab are among the platforms to have had to temporarily halt operations due to outages.

TD Ameritrade has actually started putting restrictions on GameStop and AMC as of Wednesday morning. The company said that it has restricted activity on both stocks “in the interest of mitigating risk for our company and clients.” We’ll see how long those restrictions last, because brokerages don’t typically impose these kinds of actions unilaterally.

As of now, betting “yes” on whether GameStop’s stock reaches at least $420 looks like the smart way to go.