Masterclass GameStop

In January 2021, a frenzy of investment driven by retail traders caused the shares of GameStop, a video game retailer, to surge 500 percent in just five days. These “amateur” investors found out that the shares of GameStop were heavily shorted and decided simultaneously to buy the shares in order to create what is known as a “short squeeze”. They were using social network Reddit and the mobile phone commission-free app Robinhood to execute their trades. The sharp increase in the stock price, of 500 percent in just five days, overshadowed even the recent surge in the price of Bitcoin.

It may take some time to fully understand the saga and its impact on financial markets. Yet, the long-term influence of new financial technologies and social media is becoming clearer.

What is the wider importance of the GameStop frenzy for the global economy? Might the century-long trend of declining participation of private investors in the markets be now turning? Could this saga prove symbolic of a new era in Finance? And how should regulators handle this?