1. What happened to the Gamestop? What is Gamestop?

GameStop is an American high street shop that sells games, consoles and other
electronics. The company relies heavily on the physical retail space, causing it to struggle during
during the pandemic. Although It was widely deemed as a company in declining health, the
group WallStreetBets, which has a thriving membership on site Reddit, was especially optimistic
about GameStop’s fortunes. They began buying the company’s shares, pushing the share price
higher during the final quarter of 2020. This attracted the attention of Wall Street, especially the
hedge funds.  Hedge funds involves people who bet on which companies won't do well in the
future. Hedge funds began betting that GameStop would lose a lot of value and started short
selling the company – a strategy wherein an investor borrows stocks from a certain company (in
this case, GameStop) and sells it in hopes that prices of the stocks will continue to drop. If that
happens, they can buy back the stock for even less and keep the difference as a profit. But
instead of going down, prices of the GameStop stocks were going up. Very bad news to the
short-sellers. People WallStreetBets saw that hedge funds were betting against GameStop in a
big way, shorting more shares than even exist. They saw the opportunity to push the price up and
totally mess the plan for the hedge funds. And it worked. Now, there was more demand for the
shares than supply. The hedge funds were forced to buy those shares back at large prices, losing
billions. Some of the platforms and apps that let you buy and sell shares like Robinhood in the
US then intervened, stopping people from buying GameStop shares which really angered a lot of
investors who said Robinhood was interfering in the open market and protecting the hedge funds.
For its part, Robinhood said it had limited trading to protect investors and it had to comply with
regulation.

2. How will you relate our discussion on the stock value using market price vs the
intrinsic value of the company?
Intrinsic value is the approximation of a company’s actual true value. On the other hand, the
market value of a company is its value based on the price of its shares. Hence, market value can
be considerably lower or higher than the company’s intrinsic value. Ideally, people invest in
companies that have a higher intrinsic value instead of those whose value is dictated by the
market. Estimating intrinsic value considers both tangible and intangible parameters are
considered. It also looks into the market analysis, financial statements, and the business plan of
the company.

In relation to the GameStop case, a lot of writers were curious as to what their stocks were
actually worth. This is because the stocks were trading on technical but not fundamentals. When
investing, especially on highly priced stocks, it is very important to have an idea on what it is
actually worth because at some point, the stock price will almost certainly come to reflect the
actual worth.
 According to Oscar Gonzales, the share price for GameStop doesn't tell the whole story about
the company. Indeed, one of the reasons for its excessive gains is that so many institutional
investors were betting on it to fail -- to an absurd degree. Although situations can happen
wherein stock prices, at some point, disconnect from reality, but what happened with GameStop
throws all logic and basic investment principles out the window. Additionally, it was reported
that on Dec. 1, GameStop's stock price was $15.80 a share, which gave it a market value of
slightly more than $1 billion. Later that time, the retailer's shares were trading at $325 apiece,
valuing the company at more than $22 billion, and causing it to enter the Fortune 500 list.
However, looking at how GameStop is performing as an actual business, and not just as
the target of some enthusiastic retail investors, the business is not doing well. In 2020, people
were affected with the lockdowns and therefore, video game industry experienced months of
increased revenue as people played games at home to save themselves from boredom. However,
if we look into GameStop’s fiscal third-quarter earnings report from December 2020, their sales
showed a decline of 30% from the previous year. This was because GameStop was heavily
dependent on their physical spaces and due to the pandemic, the flow of customers got limited
and some locations were forced to shut down. To connect this with the topic intrinsic and market
value, it is important to know that GameStop's inflated prices don't equate to financial success.

3. With your previous learning on financial markets and institutions, who are the
players in this scenario? What would be the repercussion due to this?
Short-sellers (institutional and professional investors) – these are the people who borrows stocks
from one company and sell it to another person. Short-sellers speculate that the price of the
borrowed stocks will fall, enable them to buy it back at a lower price later, and keep the
difference for themselves as profit. In the case of GameStop, the short-sellers were those that
were part of the hedge funds. Contrary to the dropping of price that they expected, it surged up
instead, inflicting enormous losses on them. Short-selling is actually like gambling. If your bet
was wrong, you will certainly lose money.
Retail Investors - A retail investor is an individual investor who buys and sells securities, mutual
funds or exchange-traded funds for his personal account. They trade in small quantities as part of
their investment plan. GameStop was making headlines because it was being driven by retail
investors. Users from the Reddit page WallStreetBets kept on buying the stocks, pushing its price
higher and higher.   This dramatic increase in stock price caused hedge funds that were shorting
GameStop to back out. They suffered significant losses and accused retail investors of market
manipulation.
Stockbrokers – They are licensed and entitled to trade at the Exchange and act as an agent
between buyer and seller of stocks in the market. After the surge in the prices of GameStop
shares and after some short-sellers suffered losses, large US brokers like Schwab and Robinhood
intervened by halting the trading of the shares and suspending its service. This triggered a furious
backlash from some customers. To this, Robinhood responded: “We made a tough decision
today to temporarily limit buying for certain securities. As a brokerage firm, we have many
financial requirements, including SEC net capital obligations and clearinghouse deposits.”
Stock Exchange – Is an important player in the stock market that brings buyers and sellers
together. It is also responsible in facilitating the sale and purchase of stocks. It makes sure that
trading transactions are done in an efficient, orderly, fair, and transparent manner. There were
times when NYSE halted GameStop trading due to volatility. Extreme volatility in a stock is
seen as a sign of suspicious activity in the market, and may trigger an SEC investigation.

Issuer – could be a newly established or an already existing firm that offers stocks for public sale
or private placement. They issue stocks to raise capital in order to grow the business or undertake
new projects. In the case, GameStop was the issuing corporation. As mentioned above,
GameStop was floundering and was losing a lot of customers due to the pandemics. However, it
was able to make a comeback in the stock market as a result of internet culture. Though the
prices of their shares went up, it had nothing to do with operational changes. As reported by AP
News, the attention-grabbing media coverage didn’t bring shoppers back to the stores