What Happens Next in the GameStop Showdown?
Whether it’s retail investors, hedge funds or intermediaries, the implications are not straightforward, and that’s before regulators and politicians get involved.
It’s rarely this simple.
Photographer: Mario Tama/Getty Images
The battle between retail investors and hedge funds burst seemingly out of nowhere last week, and many people are now spending the weekend wondering how it will end. The answer depends in part on two things: First, who will be first among the three groups of actors — hedge funds shorting the handful of stocks, retail investors buying them and the intermediaries enabling both sides to trade— to surrender, especially if done through a disorderly unwinding of their book? Second, how will regulators and politicians react?
What has been colorfully, and not that inaccurately, labeled as the uprising of the little guys reflects the confluence of information platforms, data, and easy-to-use products and trading apps — all of which have been helping the more general phenomenon of democratizing finance. In addition to technology, big data and some relatively simple forms of artificial intelligence, the fuel also involved an accumulation of years of the everyday small investor feeling marginalized and disadvantaged by a finance establishment that appeared to have co-opted the Federal Reserve and other agencies.