2024-02-06 07:10:42
The courage to stop before entering the game
The miracle of the gaming company ‘GameStop’
Individuals’ investment skyrockets without asking anything
Short-selling hedge fund eventually goes bankrupt
Getty Images Bank The movie ‘Dumb Money’, recently released in Korea, is based on the ‘GameStop’ stock price surge that shook the United States three years ago due to a confrontation between individual investors and hedge funds. There is a documentary on the same subject called ‘A Shot at Wall Street: The GameStop Saga’ on Netflix, which analyzes this case in depth over three parts. What exactly was the situation that attracted the attention of Hollywood and online video services (OTT)?
○ GameStop’s sudden surge
GameStop is a famous American video game retail company. Just as video rental stores disappeared with Netflix, GameStop was also in decline with the spread of mobile games. Since the hedge fund had short-sold GameStop shares, a rise in the stock price seemed unlikely. But something miraculous happens. A live broadcast by an individual investor claiming that GameStop was undervalued and certifying a large purchase became popular in the Internet community, and the stock price began to rise thanks to the power of individual investors. This individual investor with the nickname ‘roaring kitty’ has become a hot topic in the stock community and has emerged as an ‘influencer’ with numerous followers.
The popularity of Robinhood, a free stock investment app that was very popular among young people at the time, also fueled the participation of individual investors. As stock prices began to rise, everyone began to participate in the rise in stock prices without even asking. The FOMO syndrome of individual investors who do not want to be left out of popular stocks has fueled the surge in stock prices. As a result, stock prices rose by more than 100% in one day, and by more than 1,600% in one week. GameStop’s stock price, which was less than $3 in 2020, reached a peak of over $480 at the end of January 2021, reaching its peak of overheating. The hedge fund that had short-sold GameStop stocks eventually went bankrupt because it could not withstand the buying pressure of individual investors, and Roaring Cat, an individual investor who played a key role in this confrontation, made a lot of money and disappeared from the Internet community.
○ Hasty investment decisions are ‘poisonous’
Did all individual investors make money like a roaring cat? After his incident, stock prices continued to decline. In areas where volatility was severe, prices rose by more than 100% in a day, but there were also days when they fell 100%, so someone would have been unable to avoid getting burned by the boiling temperature of the market. If you step into an overheated market without a solid investment principle or strategy, there is a high possibility that you will be swayed by the public’s movements and end up making the worst decision. The movie ‘Dumb Money’ only contained stories of people who made money, but there were not only winners in the market. The documentary ‘A Shot at Wall Street’ shows the case of an individual investor who lost his entire fortune and warns of the dangers of participating in an overheated market.
Today, with the development of social media, investment information is pouring in in real time, but it is true that it is difficult to easily determine whether the information is trustworthy. The number of influencers who influence many followers despite not being true experts in their field has also increased significantly. Listening to other investors’ new perspectives is a positive thing in that it expands the investor’s horizons. However, it is necessary to check whether the process of acquiring investment information is biased toward specific channels and people, and whether investment decisions are being made hastily without careful review in order to avoid being alienated from the majority when making investments. In particular, when entering the so-called ‘hot’ area, ‘wisdom to pause for a moment before entering the main game’ is also necessary.
Oh Hyun-min, Senior Manager, Mirae Asset Investment and Pension Center
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