Gamestop Investors Who Bet Big—And Lost Big

Security guard Mr. Vergara, 25, of Virginia began investing four years ago after making the decision that he wanted to retire young. He consumes a lot of rice, drives a 1998 Honda Civic, and resides with his father in order to save money. He mostly invested his assets in diversified index funds, which are currently worth around $50,000.

Then Mr. Vergara noticed that other Reddit users had posted about purchasing GameStop shares and the stock’s meteoric climb.  He obtained a personal loan from a credit union with an interest rate of 11.19 percent in order to pay for the majority of his GameStop purchase because he didn’t want to touch his index-fund assets. At $234 per share, he bought shares.

Gamestop Investors Who Bet Big—And Lost Big

The Popular StockThen Fell By About 80%.

Salvador Vergara, who bought shares in GameStop Corp. in late January, was so enthused about the company that he took out a personal loan for $20,000 to do so. The popular stock then fell by about 80%.  GameStop stock prices hovered around $19 at the beginning of the year, shot up to roughly $350 in late January (and nearly reached $500 in intraday trading), and then proceeded to plummet back down to earth.

The shares dropped 85% from the peak closing on February 12 to close at $52.40. “I believed it could increase to $1,000. I completely bought into the hype, which was a terrible mistake, said Vergara.He stated that he intended to keep the shares because he was confident in the company’s ability to turn things around and that he would utilise his paycheck to pay the personal loan’s monthly instalments.

He plans to return to the Philippines after the pandemic is ended, live off of his savings, and establish a nonprofit organisation there. According to him, the GameStop loss delayed those plans by around six months. Regular investors now find it much easier to buy in companies like GameStop because to free trading and user-friendly apps.

New Users Searching For jackpot

Brokerage apps like Robinhood Markets are attracting swarms of new users searching for both a jackpot and a diversion in a world without international travel, live entertainment, and other common diversions. After some current investors committed additional funds at the end of the month, Melvin’s assets under management now total more than $8 billion, including the emergency funding, down from about $12.5 billion at the start of the year.

According to the source, the fund has solid liquidity and its usage of leverage is at its lowest point since the fund’s establishment in 2014. Melvin’s January losses were first revealed by The Wall Street Journal. Retail investors used Reddit’s Wall Street Bets site to discuss various trades last week, and this activity spread to other well-liked short targets, such as Bed Bath & Beyond and AMC Entertainment.

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Final Words

The forum now boasts more than 7 million users, more than tripling in just one week. Due to the short squeeze, trading in some of the more volatile names was prohibited by Robinhood and other brokerages, frustrating users who were unable to trade at will.

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