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  • Writer's pictureIshfaaq Peerally

Why Most Investors Lost Money on GameStop


The Stock Market is a winning game $SPX500 but most investors lose money in the markets. We can look at any stock to see how investors lose money in the markets but let's look at a very interesting one, GameStop $GME . This is a stock I've been following for a long time and investors lost money on both sides, by buying it and by shorting it. Besides, this is my best investment ever where I made 3300%.


GameStop stock price was down more than 90% from all-time high at some point. Investors were selling the stock as the market consensus then was that the company was going bankrupt as they could not compete with Amazon $AMZN and other online retailers. But the fundamentals showed that the company was nowhere near bankruptcy with more cash than debt and they were returning money to shareholders through buybacks ahead of a new console cycle. Also, the losses of the company were because of impairment and GameStop had positive Free cash flow.


Following their share repurchase, GameStop was also heavily shorted which led to a short squeeze. What happened after the short squeeze? The thesis has changed now. The market consensus is that it is not over and will go higher. There is no fundamentals backing such a high valuation today and Ryan Cohen has not presented any plan to boost future sales.


Why most investors lost money on both sides of the trade? It is because of lack of research. Even those big hedgefunds didn't realize that shorting a stock with more than 100% of shares outstanding short was not a good idea. Buying/Shorting a stock because you heard about it on CNBC/Reddit is not the way to make money in the market. Besides, many retail investors were shorting GameStop and now buying it. This is certainly not a stock for defensive investors.


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