ISU Professor reacts to crazy week on Wall Street
POCATELLO, Idaho (KIFI) - It was a tumultuous week on Wall Street, with the gaming company GameStop's stock being the subject of controversy.
Users of the website Reddit collaborated to push the stock of GameStop up by 400%. The huge spike resulted in a clash with Wall Street hedge funds that were short-selling the company.
Idaho State University Accounting Professor Ray Rodriguez says this week has proven to him that the public can truely manipulate a stock.
"Normally we would say an individual or even a small group of individuals can't move the market on their own, but it felt like an effort to prove that they could," Rodriguez said.
Reasons behind the stock's fluctuation are inconclusive, but Rodriguez says it could be a combination of the consumer's love for the company combined with capitalizing on everyone else's thinking.
"I'm not sure if it's individual investors simply trying to pump up a stock that they have warm feelings about or if it's let’s see if we can really move a stock," Rodriguez said. "Let’s take a stock that on the surface appears to have not much value, and let's see if we can move it, regardless if we have some warm feelings about them or not."
Other companies such as AMC, Macy's, and Bed Bath & Beyond have experienced dramatic fluctuation in their share amounts as well.
Due to the spike, investment apps such as Robinhood decided to temporarily shut down activity and not let the public access GameStop's stock. Robinhood has since let the public back into the stock, while also raising over $1 billion from investors on Friday.
Rodriguez says he disagrees with their initial decision, saying the app is one of the only avenues an individual can make an investment decision on their own.
"The Robinhood piece of it now allows people to pick any number, and it doesn't matter," Rodriguez said. "You want to play around with $5. You can buy $5 worth of stock, a percentage or a fractional share. That wasn't very easy to do 10 years ago, and now it's extremely easy to do with Robinhood."
With an unprecedented week on Wall Street, Rodriguez says he has learned of the power an individual can have on the market.
"I think that this has shined a huge spotlight on this idea that individuals can move the market," Rodriguez said. "Individuals now have social media as a way to communicate and collude. They can get together and move the market, and I think that's a scary thing."
