Title. How does a stock move so violently without any news from the company?
In: Economics
Answering this question on reddit is very tricky. There is a considerable number of people on this site, who have a meaningful financial investment in GME. As a result they have a conflict of interest, since they financially benefit from a rise in stock price.
Yet this stock price (even before it’s recent increase) is massively above anything, that could reasonably be justified by the facts or performance of the company. Purely looking at the business of gamestop, the price of its stock makes no sense; it’s massively overvalued. This value is based on a varying set of theories about massive financial fraud, which supposedly could be uncovered by the purchase and refusal to sell GME shares. Yet the reasoning or evidence behind these theories is so far removed from reality, that it’s impossible to make sense of it in an ELI5 manner in a reasonable comment length. Dan Olsen, aka Folding Ideas, made a good (https://www.youtube.com/watch?v=5pYeoZaoWrA&ab_channel=FoldingIdeas) explaining the issue; it’s over two hours long!
But at its core it’s this: The people who currently have a large financial interest in GME prices being high, need other people to buy into their believes, since that creates demand for their stocks and hence raises prices. Since it’s current value is above anything based on normal stock valuations, they need people to believe their highly questionable theories. Hence they have a clear incentive to spread their theories. And there is nothing preventing people from upvoting falsehoods benefitting them or downvoting reasonable criticism. A look at the post history on r/wallstreetbets or r/superstonk will show massively upvoted posts with virtually no criticism (especially the latter), despite reality having since proven their ideas very wrong.
The price of GME has gone up and down for years now, often without reasonable cause. The current increase likely has a lot to do with a central figure to the aforementioned theories having returned from a long time social media hiatus. But trying to find reason in GME price movements carries considerable risk of turning one insane.
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