Stock short-selling 'has been done for years,' analyst says after GameStop stocks fallout

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Posted at 12:07 PM, Jan 31, 2021
and last updated 2021-01-31 22:41:16-05

NORFOLK, Va. - It was the shakeup that rocked Wall Street last week: Reddit users from a group known as r/WallStreetBets bought stocks of the brick-and-mortar store GameStop that investors short-sold at lower prices, causing the video game store chain’s stock to go up.

"I don't think anyone expected anyone to have a mass movement like we did,” Dominick Miserandino, a financial analyst, told News 3.

The price of each stock of GameStop sold at just under $20 at the beginning of the year. Then, during the middle of last week, the price rose to over $400 a share. The stock then saw trends where the price decreased and increased.

The situation brought scrutiny from investors and regulators. One lesson to be learned is, as Miserandino said, “This has been done for years by Wall Street insiders and people running hedge funds, and this is simply users who took that knowledge and acted upon on it."

Miserandino said what the Reddit users did was fair game.

"These were not secret insiders,” Miserandino explained. “They didn't do anything illegal, they read the market, they saw the stock was short-sold and they decided to act upon on it."

He has also worked on Wall Street and has held high positions at several companies.

"I think a lot of people now are starting to reevaluate the processes because it is transparent,” Miserandino said, when asked what friends and former colleagues on Wall Street are saying in the aftermath. “So the process of what stopped them from trading, at one point, they're investigating how do people coordinate and how much can you really short-sell?"

Trading apps like Robinhood froze trading stocks of GameStop after the fallout, but then re-allowed it. Other stocks were also being bought by online users including stocks for AMC Theaters, a national movie theater chain.

Meanwhile, Miserandino says he hopes this fallout inspires people to cautiously invest moving forward.

"I think the advice is to learn from this experience, understand this experience and act cautiously," he said.