BOSTON (CBS/AP) — Sen. Elizabeth Warren is weighing in on the GameStop stock market frenzy. The senator from Massachusetts on Wednesday released a statement addressing the skyrocketing stock price of the struggling retail chain.
GameStop stock was up nearly 200 points on Wednesday to close at $347 a share after sitting below $18 just a few weeks ago. A volunteer army of smaller investors have been rallying on Reddit and elsewhere online to support GameStop’s stock and beat back the professionals.READ MORE: Tatum, Brown shoulder blame for Celtics' third quarter collapse in Game 1
“With stocks soaring while millions are out of work and struggling to pay bills, it’s not news that the stock market doesn’t reflect our actual economy,” she said. “For years, the same hedge funds, private equity firms, and wealthy investors dismayed by the GameStop trades have treated the stock market like their own personal casino while everyone else pays the price.”
Warren sits on the Senate banking committee, overseeing financial services and federal regulatory agencies.
“It’s long past time for the SEC and other financial regulators to wake up and do their jobs – and with a new administration and Democrats running Congress, I intend to make sure they do,” she said.
It's long past time for the SEC and other financial regulators to wake up and do their jobs – and with a new administration and Democrats running Congress, I intend to make sure they do.
— Elizabeth Warren (@SenWarren) January 27, 2021
Massachusetts Secretary of State William Galvin is monitoring the situation and has called for the New York Stock Exchange to suspend trading in GameStop for 30 days.
GameStop’s stock has long been the target of investors betting that its stock will fall as it struggles in an industry increasingly going online. The retailer lost $1.6 billion over the last 12 quarters, and its stock fell for six straight years before rebounding in 2020.
That pushed investors to sell GameStop’s stock short. Essentially, these short sellers borrowed shares of GameStop and sold them in hopes of buying them back later at a lower price and pocketing the difference. GameStop is one of the most shorted stocks on Wall Street.
But its stock began rising sharply earlier this month after a co-founder of Chewy, the online retailer of pet supplies, joined the company’s board. The thought is that he could help in the company’s digital transformation.
At the same time, smaller investors gathering on social media have been exhorting each other to keep pushing the stock higher. There is no overriding reason why GameStop has attracted those smaller investors, but there is a distinct component of revenge against Wall Street in communications online.READ MORE: Dreadful third quarter dooms Celtics as Butler leads Heat to 118-107 victory in Game 1
“The hedge fund owners are crying as a result of us,” one user wrote on a Reddit discussion about GameStop stock. “We have the power in this situation, not anyone else as long as we stay strong!”
Almost immediately after, another user shouted in all capital letters, “BUY AND HOLD WE WILL BE VICTORIOUS.”
The battle has created big losses for major Wall Street players who shorted the stock. As GameStop’s stock soared and some of the critics got out of their bets, they had to buy GameStop shares to do so. That can accelerate gains even more, creating a feedback loop. As of Tuesday, the losses had already topped $5 billion in 2021, according to S3 Partners.
Much of professional Wall Street remains pessimistic that GameStop’s stock can hold onto its moonshot gains.
Analysts at BofA Global Research raised their price target for GameStop on Wednesday from $1.60, all the way up to $10. It was at $362 in midday trading.
Nevertheless, the phenomenon does not appear to be fading.
AMC Entertainment Holdings Inc., the theater chain that has been ravaged by the pandemic, posted a quarterly loss this month exceeding $900 million.
It appears, however, that AMC has become the next battleground in the fight between smaller, retail investors, and Wall Street.
Shares of AMC spiked 260% when trading began Wednesday and #SaveAMC is trending on Twitter.MORE NEWS: Natick elementary school custodian saves student choking in cafeteria
(© Copyright 2021 CBS Broadcasting Inc. All Rights Reserved. The Associated Press contributed to this report.)