Let's Talk about the Gamestop/Stock Market Fiasco!

Authored By: Kristen Williamson on 2/18/2021


Does the recent Gamestop stock situation have your head spinning? Ours too! To help shed some light on this confusing topic, we got the inside scoop from our new Vice President of Finance, Tamara McGovern!
 



Kristen: Tammy, in the most simplified way possible, what exactly is happening in the world of the stock market right now?

Tammy: The stock market has been on a wild ride the last few weeks with names like GameStop and AMC making the headlines. While these events make for interesting news, people trying to “game the system” (pun intended) are as old as the stock market itself. In this case, hedge funds, which are usually large, institutional investors, were shorting the stock--meaning they were betting that the stock’s price would fall. If enough hedge funds bet in the same direction, that can become a self-fulfilling prophecy and the hedge funds win, while companies like GameStop lose.

 

Kristen: So, where does Reddit come into play here?

Tammy: In this case, a platform of small investors on Reddit got wind of what the hedge funds were doing, and decided to buy GameStop—completely opposite of the hedge funds’ bet. The small investor platform’s strategy caught like wildfire, and lots and lots of people piled in the purchase the stock. This resulted in more buyers than sellers, and the stock price shot up. The hedge funds who were betting that the stock would fall had to cover their bets (called short-covering), driving the price up even further. While this created a temporary win for the small investors, the stock fell over 60% in one day because the company wasn’t actually worth as much as the price would imply. As was the case here, usually nobody wins based upon rumors or manipulation.

 

Kristen: Wow! As fascinating as all of this is, where do credit unions come into play when it comes to shareholders?

Tammy: As a credit union, MFCU is not a publicly traded company traded on any exchange. In fact, we are a savings & lending cooperative, which means we’re owned by you, our members—not some hedge fund in another state or even an internet platform of investors. We’re here for you and because of you, and we want to keep it that way. That’s why we stay focused on our community and our financial stability--so we can continue serving you for the years to come.
 



So there you have it! As a credit union, we are a not-for-profit institution, upholding our commitment to our members, not shareholders. All profits go back to our membership in the form of dividends, better interest rates, improved products and services, and local community philanthropic efforts. It’s the credit union difference!

Not a member yet? You can stop into any of our 11 branches OR apply online today! Your membership at a credit union authorizes you to partial ownership of the credit union and to voting for our volunteer board of directors! Whether you have $5 or $5 million in your credit union account, each member is entitled to a vote.



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