The video game distribution company Gameshop has made a name for itself through a massive purchase of its shares by stockbrokers. The objective was to prove wrong the Wall Street financiers who were already planning to buy the company because of the bad situation it was going through. Thus, by buying Gameshop's shares, the price of the group's shares inflated and several investment funds found themselves in financial difficulty. However, this sudden rise in Gameshop's shares raised many questions, hence the investigation demanded by elected officials.
Despite last week's miraculous surge in Gameshop (a rise of nearly 400%), the group has lost 50% of its shares since Tuesday. This decline would have continued over two days, reaching 65% or more. Indeed, last week's fund of amateur stockbrokers has greatly shaken the calculations of Wall Street. The large hedge funds had bet on a short sale on Gameshop and the film company AMC.
As these companies were not performing well, it was unlikely that the value of their shares would rise to this extent without the intervention of the stockbrokers. This is food for thought for many people, as they notice that the market can be manipulated by the motivations of a third party.
Elected representatives therefore speak of " manipulations " or " special effects ". They consider this to be an abuse of hedge funds and would like to see action taken against hedge funds through an inquiry for greater transparency.
Wall Street activities would take a heavy blow if the stockbrokers intervene frequently to give value to structures that appear to be underperforming. It is even more blatant if the intention is simply to thwart large hedge funds, as was the case with Gameshop. So, if the latter alone can create so much confusion, it is necessary to question the integrity of the markets.
The Secretary of the Treasury, the American Janet Yellen, then proposed a meeting with three major bodies involved in financial regulation. These include the Securities and Exchange Commission (SEC), the federal agency in charge of regulating stock exchanges (CFTC) and the Federal Reserve. At this meeting, she would like to discuss the extent of financial market fluctuations and see the accounting of recent activities.
As for elected officials, Senators Bernie Sanders and Elizabeth Warren insist that the SEC conduct an investigation. It would provide a rigorous examination of the activities and demeaning attitudes of Wall Street actors. Republicans and Democrats seem to be unanimous in their decision to revise the regulations.
However, the SEC has stepped in to reassure that it will monitor the situation even as the media continues to report on the incredible Gameshop affair that has rocked Wall Street.
So that's the gist of the investigation Wall Street has been asked to conduct into Gameshop.