Discuss the following while answering the questions
below:
In late January 2021, retail investors from a subreddit called “Wallstreet Bets” generated a large amount of interest in purchasing stock in GameStop, a retail video game store.Hedge funds like Melvin Capital had shorted the same stock, so when the price of the stock rose from below $20 to over $400, they suffered almost $20 billionin losses. The controversy multiplied when some trading platforms, especially
Robinhood, prevented investors from buying additional shares in GameStop. Theresulting media frenzy caused many to consider (or learn) what shorting a stock
entails, what counts as “market manipulation”, and the ethics and
incentives of trading platforms like Robinhood. The narrative that emerged was
like that of David vs. Goliath, the “little guy” vs. the big
financial firms.
How do investors short stocks?
What is the difference in the downside risk of
purchasing a stock vs. shorting a stock?
Is short selling an ethical practice?
Is it ethical for individual investors to work
together to “pump up” the price of a stock?
What about large firms
engaged in similar practices?
Do trading platforms have an ethical obligation
to customers to allow both buying and selling of any stock they have on their
platform?
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