Retail investors on the subreddit r/WallStreetBets coordinated to drive up the price of GameStop stock in January 2021, squeezing hedge funds that had heavily shorted the stock. This led to huge volatility, with GameStop shares rising over 1,500% in two weeks. However, the trading app Robinhood then restricted buying of GameStop and other meme stocks, sparking backlash. Many hedge funds suffered major losses on their GameStop short positions, including Melvin Capital which lost 53% in January. The saga highlighted the power of retail investors to influence markets and sparked regulatory interest.

1. GameStop short squeeze
(Jan – Feb 2021)

2. Content
+ What is GameStop's short selling?
+ Retail investors and institutional investors (role in GameStop
stock case)
+ GameStop's introduction (fall in stock prices)
+ Online discussion on reddit
+ Robinhood Interference.
+ Stock Volatility.
+ Loss incurred by retail investors
+ Concluding remarks- learnings

3. What is GameStop Short Selling ?
Short Selling/short squeeze
+ Short squeeze is a term used by market participants to refer to a
phenomenon where short sellers in a stock who have placed
their bets on a stock’s fall, rush to hedge their positions or buy
the stock in the event of an adverse price movement, in order to
cover their losses.

5. Who are Institutional Investors?
+ An institutional investor is a company or organization that invests
money on behalf of clients or members.
+ Institutional investors are considered savvier than the average
investor and are often subject to less regulatory oversight.
+ Buying and selling of large positions by institutional investors can
create supply and demand imbalances that result in sudden price
moves.

6. Who are Retail Investors?
+ A retail investor, also known as an individual investor, is a non-
professional investor who buys and sells securities or funds
that contain a basket of securities such as mutual funds and
exchange traded funds (ETFs).
+ Due to their smaller trades, retail investors may pay higher fees and
commissions, although some online brokers offer no-fee trading.
+ The retail investment market is enormous since it includes
brokerage firms, online trading etc

7. Role of Retail and Institutional Investors in
GameStop Case
+ GameStop Corp's shares owned by Institutions show the percentage of the
outstanding shares of stock issued by a company that is currently owned by
other institutions. The role of Institutional Investors is such that they are
currently holding positions in the board of management.
+ Institutional Investors may also work to push the share price higher once
they own the stock.
+ A large group of retail investors on Reddit forum bought the share in huge
quantities. The share price rose, created panic amongst Institutional
Investors. Therefore in the GameStop context retail investors changed the
overall tone in the financial markets.

8. GAMESTOP INTRODUCTION
(fall in stock prices)
+ GameStop Corp. is an American video game, consumer electronics,
and gaming merchandise retailer.
+ The company is headquartered in Grapevine, Texas , United States,
and is the largest video game retailer worldwide.
+ It was founded in 1894 as Babbage's, and took on its current name in
1999.
+ The company’s performance declined during the mid 2010’s because
of a shift from video game sales to online shopping and downloads
and failed investments by GameStop in smartphone retail.

9. + GameStop was experiencing a success from 2004 – 2016
+ GameStop acquired EB Games (formerly Electronics Boutique) in
2005 for $1.44 billion. The acquisition expanded GameStop's
operations into Europe, Canada, Australia, and New Zealand. Two
years later, in 2007, GameStop acquired Rhino Video Games
from Blockbuster LLC for an undisclosed amount. Rhino Video
Games operated 70 video game stores throughout the Southeastern
United States.
+ This acquisition took place till 2016 when on 3rd August, 2016
GameStop acquired 507 AT&T store chains in plans to diversify
into new businesses and less dependent on the video game market

10. DECLINE IN THE STOCK PRICES
+ The viewable changes in the decline of the price started taking place
from 2016
+ There are numerous reasons as to why there was a decline in the
prices

11. DECLINE – Changing Market Conditions
+ The market for physical game media has been in a state of decline due to downloadable
games. This has resulted in a decline in sales at GameStop.
+ In 2017, GameStop reported a 16.4% drop in sales
+ In February, 2017, a program called ‘Circle of Life’ was enforced on all its retail
employees.
+ Owing to this, later in the month of February, GameStop reformed the program to solely
focus on the store as a whole.

12. Decline – Financial Losses
+ Shares of GameStop stock fell to 16% in 2016.
+ On February 28, 2017, shares dropped an additional 8% following
Microsoft's announcement of its Xbox Game Pass service
+ Following these reports, GameStop announced to close stores in
2017 and expand its non-gaming business
+ On the same day they decided to open up new Technology Brand
stores and Collectibles stores leading to a 7.6% fall in revenue

13. Decline – Changes in the Management
+ The resignation of J. Paul Raines from GameStop on January 31,
2018 and DeMatteo stepping in as the interim CEO
+ On February 6, 2018, Michael K. Mauler was appointed as the CEO and
member of the board of directors who resigned after two months and
chairman Dan DeMatteo was named interim CEO.
+ On May 31, 2018, GameStop named Shane Kim as interim CEO. Kim was
replaced by George Sherman in March 2019
+ On March 12, 2020, it was announced that a group of shareholders sent a
"threat" letter to appoint a stockholder representative as a director
+ The frequent changes in the management led to changes in the way of
working in the company and hence, the contributing to the decline.

14. Decline – The Pandemic
+ Government efforts to slow the spread of COVID-19 required GameStop to
close the physical operation of all of its 3,500 stores from roughly March to
May 2020, though not without some controversy in the early stages.
+ While digital sales grew by 519%, its retail dropped by more than 30% in
the same period from the prior year, and the chain reported a US$165
million loss in contrast to a US$6.8 million for the same quarter in 2019
+ Therefore, the pandemic contributed to the drop in the stock prices

15. Online Discussion On Reddit
+ At the centre of this stock trading frenzy is a battle between amateur
investors and multi-billion dollar hedge funds.
+ But before delving into why Reddit users suddenly took an interest in
GameStock, here’s a quick reckoner of key terms such as day
trading, short selling and hedge funds.
1.Day trading
2. Hedge Fund

17. Stock Volatility
+ Rise in stock prices.
+ Elon Musk as a catalyst.
+ Reddit users built the foundations for a
short squeeze on GameStop, pushing up
the stock price significantly.
+ Stock price increased 1,500 percent over
the course of two weeks, and its high
volatility caused trading to be halted
multiple times.
+ More than 175 million shares of
GameStop were traded on January 25,
the second largest total in a single day.

19. Robinhood
Interference
Robinhood = Investing
app.
It's popular among
millennials, who make up a
majority of its users and
can conduct a variety of
investments for free.

20. Robinhood Banned
GameStop Trade.
+ Robinhood prohibited its users
from buying shares in
GameStop , as Reddit users
propelled shares in the video
game.
+ Users reported the inability to
buy the stock — only to sell
option.
+ Cited issues with volatile stock
and regulatory requirements.

21. Robinhood and
GameStop Saga
It cited "market volatility" as its
reasoning and would only allow
customers to sell their shares of these
companies, not buy or trade in any
other way

22. Who's mad at
Robinhood?
Retail Investors.
The Reddit users behind
the GameStop's
skyrocketing share
value, includes big users
of Robinhood who felt they
were slighted and
betrayed by the decision.

23. Loss incurred by retail investors

24. Loss incurred by retail investors
+ Short sellers who had betted against GameStop suffered large losses as a
result of the short squeeze.
+ Melvin Capital, an investment fund that heavily shorted GameStop, had
lost 30 percent of its value since the start of 2021, and by the end of
January had suffered a loss of 53 percent of its investments.
+ On January 27, a Melvin Capital spokesperson stated that the fund had
closed its position after repositioning its portfolio. Melvin ended January
with more than $8 billion in assets after having started the year with
roughly $12.5 billion in assets
+ On January 26, it was reported that short sellers lost a total of $6 billion
due to the squeeze.

25. Loss incurred by retail investors
+ Timeline

26. Timeline
8 Dec.
GameStop shares tank after company
misses Wall Street estimates for
quarterly revenue as pandemic-led store
closures and intense competition from
digital-game sellers hit sales.
13 Jan.
GameStop shares rise 57%, followed by
another 27% jump the next day to
$39.90. Its median target price among
analysts is $12.50.
19 Jan.
Short seller Citron Research mocks
GameStop, saying buyers at these
levels are “the suckers at this poker
game” and stock “back to $20 fast.”
22 Jan.
Shares rise another 50%.
25 Jan.
GameStop stock soars as much 144%
then settles up 18% with retail traders
storming in to buy more.
25 Jan.
Hedge fund Melvin Capital Management
receives $2.75 billion investment from
Citadel, the Chicago-based hedge fund,
after losing on a series of short bets,
including on GameStop.

27. 26 Jan.
Elon Musk tweets
"Gamestonk!!"
26 Jan.
Shares surge
92.7%. trading in
GameStop
suggests there is
something
“systemically
wrong” with
trading.
27 Jan.
Trading volumes
in U.S. hit all-
time record
levels at 24.5
billion shares
traded and 57.1
million contracts
traded.
27 Jan.
GameStop hits a
closing high of
$347.51.
27 Jan.
Melvin Capital
and Citron close
the majority of
their GameStop
position at a loss.

28. 28 Jan.
Robinhood, along with several
other brokerages, restricts
trading in GameStop after the
regulatory deposit requirements
for settling the securities
skyrocket. With buying
restricted at many brokerages,
but selling allowed, the stocks
sell off.
28 Jan.
The U.S. House Financial
Services and Senate Banking
committees says to hold a Feb.
18 hearing on the stock market
following the trading restrictions.
29 Jan.
Robinhood begins easing
trading restrictions on stocks
caught up in the so-
called Reddit rally.
1 Feb.
Robinhood raises $2.4 billion in
capital after raising $1 billion the
previous week.
2 Feb.
U.S. Treasury Secretary Janet
Yellen calls meeting of top
financial regulators to
discuss market volatility driven
by retail trading in GameStop
and other stocks.
4 Feb.
Robinhood removes all trading
curbs. The following day,
GameStop hits a session high
of $95 and closes up 19.20% at
$63.77.
9 Feb.
GameStop trading at around
$40 a share
18 Feb.
U.S. House panel holds hearing
titled: "Game Stopped? Who
Wins and Loses When Short
Sellers, Social Media, and
Retail Investors Collide
Regulatory authority (investigation)

29. Lawsuits filed against Robinhood
1. A Robinhood customer filed a class-action lawsuit against the
company on January 28 for halting trading on GameStop.
2. A second class-action was filed in the Northern District of
Illinois claiming that Robinhood's decision to halt trades was made
"to protect institutional investment at the detriment of retail
customers"
3. A man in Colorado filed a federal lawsuit against Robinhood.
4. As of February 2, Robinhood was facing 34 separate class-action
lawsuits

30. CRITICAL LEARNINGS FROM THE CASE
Don’t buy or hold
stock as a ‘fan.’
1
Only take bigger
risks with money
you’re willing to
lose
2
Don’t just react—
research
3
Keep your
emotions out of
investing
4
Use online
investment
platforms with
caution
5

31. THANK YOU

32. Reference
+ https://www.vox.com/recode/2021/2/2/22261097/gamestop-wallstreetbets-short-seller-
hedge-funds-losses-robinhood
+ https://abcnews.go.com/Business/gamestop-timeline-closer-saga-upended-wall-
street/story?id=75617315
+ https://financialservices.house.gov/calendar/eventsingle.aspx?EventID=407107
+ https://portolapilot.com/gamestop-stock-falls-following-short-squeeze-conditions/
+ https://www.natlawreview.com/article/gamestopped-regulators-react-to-short-squeeze
+ https://weekdaytimes.com/business/2021/01/22/gamestop-shares-leap-as-day-trading-
mob-tussles-with-short-seller
+ https://www.mobilemarketingreads.com/robinhood-and-reddit-top-the-app-store-following-
gamestop-mania/

33. + https://www.barrons.com/articles/gamestop-stock-has-lost-a-
fifth-of-its-value-because-little-good-came-out-of-its-earnings-
report-51616602311
+ https://www.washingtonpost.com/business/2021/02/01/underst
anding-gamestop-situation/
+ https://www.investopedia.com/terms/i/institutionalinvestor.asp
+ https://www.cnbc.com/2021/02/05/gamestop-mania-may-not-
have-been-the-retail-trader-rebellion-it-was-perceived-to-be-
data-shows.html