Advertisement

Lubbock financial advisor warns against ‘volatile’ GameStop as apps lock out buyers

Updated: Jan. 28, 2021 at 9:56 PM CST
Email This Link
Share on Pinterest
Share on LinkedIn

LUBBOCK, Texas (KCBD) - The stock market is known for its ups and downs, but the rise and fall of GameStop is really turning heads. The short squeeze of the company’s shares is the brainchild of the subreddit WallStreetBets.

The intention? To turn the tables on powerful hedge funds that had shorted GameStop shares, and those of many struggling corporations.

“It’s not a new concept that if someone’s levered on one side of a trade we can go after him and make money. That’s been around forever,” financial advisor Tyler Sturdivant said.

Sturdivant says, it might be fun but buying into the hype can be risky business.

“You only have so much money out there. If there’s not a buyer left, the last buyer kind of gets caught holding the bag, and that’s what we kind of saw today,” he said.

The highest a GameStop stock was valued at on Thursday was $492, then at the closing bell it dropped to just $193 a share.

“Especially when you have a stock that volatile, that’s moving 100% a day, that’s not normal. That’s definitely a gamble,” Sturdivant said.

He also says it’s now out of the hands of those who started this trend.

“Once there’s blood in the water, everyone starts playing. Those big high-frequency traders, and other hedge funds. As of now, I would say retail is not driving the boat anymore,” Sturdivant said.

Robinhood, the trading app that prevented its users from buying GameStop shares on Thursday, is now facing a class-action lawsuit.

Lawmakers on both sides of the aisle are coming together to investigate the fallout.

Most notably Republican Senator Ted Cruz and Democratic Representative Alexandria Ocasio-Cortez from New York.

Copyright 2021 KCBD. All rights reserved.