In defense of Robinhood
Video game retailer GameStop (ticker: GME) made national headlines after its stock soared from a price of $17.25 on January 4, 2021, to an intraday high of $483 on January 28, 2021—a 2800% gain. Some fortunate speculators, most notably a 34-year-old Boston man named Keith Gill, profited immensely from this rise. Others bought in too late to the hype and experienced significant losses—on Thursday, February 4, the stock ended the trading day at $53.50 , an 88.9% drop from the January 28 high. In this post, I would like to discuss my view on why this happened, as well as some of the other views I've seen on the Internet and why I think some are a little unjustified. For disclosure, I have an account at Robinhood, but I have not done any trading on GameStop's stock (or any other meme stock). Background Short selling When most people invest in the stock market, they buy shares of a particular company's stock, hoping that later on, they will be able to sell their shares to some...