BusinessStacy M. Brown

Black Investors Took Note of Reddit’s Rescue of the GameStop Stock

The story of 10-year-old Jaydyn Carr and his mother, Nina Carr, is the stuff that creates legends on Wall Street.

Their financial windfall came about as a result of the recent trading frenzy not before witnessed in the industry – and one that left even the most astute struggling to explain.

The band of amateur traders, influenced by the platform Reddit, encouraged whoever was listening to buy shares of the flailing GameStop, AMC and Koss stocks because hedge funds had bet against them and were swooping in to make big profits.

In one day, because of the amateurs’ actions, the hedge funds lost over $14 billion. And, despite recent declines, GameStop shares remained well up at about 184 percent this year. AMC (up 200 percent) and Koss (more than 400 percent) also remain up in 2021.

African Americans and other minorities have generally shown little interest in stock trading, but the exposure of how Wall Street works have intrigued many.

Jaydyn had been a GameStop customer when, in 2019, his mother decided to purchase ten shares of the company’s stock for a little over $6.

Nina Carr told the New York Times that her phone blew up during the recent trading frenzy, and she noticed the stock soaring to an eye-popping $351 per share. She consulted Jaydyn on what he wanted to do since she had purchased the stock for him.

“I was trying to explain to him that this was unusual,” the Times reported her saying. “I asked him, ‘Do you want to stay or sell?’”

Jaydyn decided to sell his shares, earning $3,200 — a return of more than 5,000 percent on an investment of about $60.

The development left the most seasoned puzzled. U.S. Treasury Secretary Janet Yellen admitted that she needed to understand what occurred.

The trading term to explain what happened is called a short squeeze.

But before the squeeze by the amateur traders, hedge fund giants attempted short sales.

A short sale is when someone borrows a share of a stock and then sells it. If the price falls, the purchaser can buy the stock at a lower price and keep the difference.

In other words, as explained by CNBC, if you short a $7 stock and it slides in price, and you buy it at $2, your profit is $5.

“However, if the price goes up, at some point, you still would need to finish the transaction – that is, you’d have to buy that stock to repay the brokerage. So, if that $7 stock rises, and you have to buy it at $10 to cover your short position, you’ve lost $3.”

The GameStop situation has opened eyes – including that of Black investors.

“What this means for the African American investor is that it shows the power of unity and a united front,” Christon’ The Truth’ Jones, the 14-year-old African American wunderkind investor from Baltimore.

“Showing that it is possible to take back the power from the Institutional investors like the big banks, and hedge funds. Because for years, the Wall Street investors have bet against the struggling GameStop, which has been a failing business ever since gamers began buying directly from the consoles,” Christon added.

“With the big Institutional investors on Wall Street betting against GameStop they were sure the game retailer would fail, and they would receive big payouts from betting against the retailer. All in all, it represents our ability to come together as a people and use our numbers, resources, and intellect to our advantage to break down the systems that have been put in place to oppress us.”

Film producer Jimmy Philémond-Montout of PHILEMOND LTD said the Reddit investors democratized World Street and Hedge Funds’ opaque world.

“What it means is that more African American investors will appear, thanks to the slew of information that is readily available online, not just the run-of-the-mill, textbook information but the gritty and dirty,” Philémond-Montout offered.

“We see this in many different avenues, and to me, that is the beauty of online message boards and the internet in general. Thorvald McGregor or Lawrence Lewis are credited with being the first registered African-American securities salesman in 1949.

“Harvey Thomas, Forrest Tomlinson, and George King were the first three African-American brokers to be hired by Merrill Lynch in 1965. Travers Bell and Willie Daniels established Daniels & Bell, Inc. in 1971, making it the first African American firm on the New York Stock Exchange.

“Now, thanks to Robinhood, Etoro, and TD, among others, everyone can be an investor. We have to read and learn to understand how it works fully, the good and the bad stuff, but we have access to the market. I think wild times are ahead in general, and that the Afro-descendant community has to take part in this.”

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Stacy M. Brown

I’ve worked for the Daily News of Los Angeles, the L.A. Times, Gannet and the Times-Tribune and have contributed to the Pocono Record, the New York Post and the New York Times. Television news opportunities have included: NBC, MSNBC, Scarborough Country, the Abrams Report, Today, Good Morning America, NBC Nightly News, Imus in the Morning and Anderson Cooper 360. Radio programs like the Wendy Williams Experience, Tom Joyner Morning Show and the Howard Stern Show have also provided me the chance to share my views.

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