Hedge Fund Managers are calling “foul” and Robinhood comes in to Expose Rigged System
By: Sammy Quarrato
GameStop like many retail businesses has been shutting down in mass numbers ever since Amazon’s large success in the market.
Even before the Lockdown came in full swing in early March 2020, approximately 9,302 stores closed in the year 2019. This was a 60% jump from the year prior and the worst year for store closures up to that point in time.
GameStop in particular struggled due to them purchasing properties from Sprint which operated approximately 1,500 stores under the Sprint brand. They also bought AT&T Mobile stores.
They were hoping to make $1 million apiece but failed to reach that threshold thus mutating into a financial liability instead of a profit-maker.
Overall, GameStop has been expected to essentially fall into a deep decline which would leads to them getting their stocks shorted by the hedge fund, Melvin Capital.
The concept of shorting a stock “is when an investor borrows shares and immediately sells them, hoping he or she can scoop them up later at a lower price, return them to the lender and pocket the difference” (MarketWatch).
This was essentially what Melvin Capital and other hedge funds began doing to GameStop. Which was by shorting their stock 100%, hoping that the price of GameStop stock would plummet even further.
The subreddit called Wall Street Bets saw this and decided to play Wall Street’s game and invested their money into the GameStop stock.
Word quickly spread on the internet and the name ‘Wall Street Bets’ was quickly known. Billionaire Elon Musk even tweeted about this to get more people to buy GameStop stock.
Musk has been known for being a critique of the practice of shorting stocks but he understood the amount of profit he would gain from this occurrence.
Furthermore, Tesla’s stock has risen due to some of the redditors who invested in GameStop.This, in turn, benefited Tesla and aided Musk into becoming the world’s richest man for a short while alongside Tesla becoming the most valuable automaker.
Either way, there is no denying that his involvement caused the detriment to these hedge funds to be more brutal than it already was.
The hedge fund, Melvin Capital, lost about 53% of its investments due to GameStop stock going up by over 400%.
Robinhood decided to halt trading specifically with GameStop alongside other stocks such as AMC being overhauled from being traded.
After a long public pressure campaign, they finally gave in to the demands of the people and allowed these stocks to be sold freely, however, the damage was already done.
This was effectively exposing how in many ways, these rich and powerful companies were an elite cabal of corporatists who will privatize the wins and socialize the losses.
Anytime they do well, they want as little regulation as possible, and when they start to lose, they want either the government who are bought out or other big corporations themselves to rig the system in favor of themselves.
Billionaire Leon Cooperman stated —the same Billionaire who cried when speaking about potentially paying a wealth tax if either Warren or Bernie won the democratic primary—that these people who were investing in GameStop stock were lazy and just waiting for stimulus checks to come and that the concept of people of his economic class paying their fair share was a “Bullshit concept”.
This alone shows that the greater divide in the United States isn’t left or right, it’s the common people vs the elite.
In 2018, it was the first time in American history where billionaires were paying a lower effective tax rate overall compared to the average American.
The top three wealthiest people own more wealth than the overall bottom half of society. The top 1% of Americans own 50% of the stocks, and CEO’s used to make about 25-30 times what their employees made back in the mid to late 20th Century which now in turn is about 275 times what their workers make.
And that’s only scratching the surface as to how massive income inequality is in this country. This isn’t capitalism, this is corporatism and in some ways, corporate socialism.
Money in politics is a clear contributor as to why the United States Government is bought out by corporations and big money interests.
Secretary of Treasury, Janet Yellen, took $810,000 in speaking fees from Citadel to speak to Wall Street. Citadel owns Robinhood.
The legal side of lobbying leads to detrimental factors for the average person in America. Congresswoman Alexandra Ocasio-Cortez and Senator Ted Cruz agree that there should be an investigation into what has occured.
In this country, the little guy plays by the rules and gets put in place by those who are wealthy. Those same wealthy people will quickly change those rules to keep their control of a flawed system that they exploit.