What you need to know about GameStop’s stock price chaos

Here’s how ordinary investors, spurred on by a Reddit message board, took on the big Wall Street funds and sent share prices soaring for the video game retailer

GameStop is in midst of a dizzying rally that has sent its shares up more than 400 percent this week alone. (Alessia Pierdomenico/Bloomberg)

GameStop’s improbable run has lifted its stock to meteoric heights — all propelled by ordinary investors, spurred by a Reddit message board, looking to show up the Wall Street funds that bet big money on the shares to fall.

The frenzied trading has catapulted the video game retailer’s valuation to nearly $20 billion, a fourteen-fold increase from a month ago. Prices have risen so fast, and the drama over its stock trading has consumed so much attention, that members of the Biden administration and the U.S. Securities and Exchange Commission were compelled to say they were monitoring the situation.

Regular investors have openly rebelled against the deep-pocketed hedge funds that viewed GameStop as a mall-based dinosaur, destined to go the way of the record store. GameStop shares spiked nearly 70 percent Friday, closing out at $325 per share — a tumultuous week on Wall Street with a more than 400 percent gain.

Reddit’s /r/wallstreetbets astronomical rise

They contend that moving away from physical stores and toward e-commerce, mobile gaming and streaming could reverse the company’s spiraling financials. GameStop has lost money in five of the past six quarters, and said revenue fell 30 percent in the most recent three-month reporting period.

Enthusiastic traders also figured that if the stock price rose, all the giant funds that had brazenly bet against the company would get crushed by the weight of being wrong. This, they intuited, would trigger a cycle that would further elevate the company and enrich the everyday trader at the expense of the Wall Street establishment. Regular investors have followed the same trading playbook with such brands as AMC Entertainment, BlackBerry, and Nokia, among others.

GameStop: What you need to know

The latest: The CEOs of Reddit, Citadel, Robinhood, Melvin Capital and the Reddit user who helped set off the GameStop stock frenzy testified before the House Financial Services Committee.

Read their testimony here: Reddit | Citadel | Robinhood | Melvin Capital | Keith Patrick Gill aka ‘Roaring Kitty’

FAQ: What you need to know about GameStop’s stock price chaos

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