[B-SIDE Podcast] GameStop, short selling, and social media

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Because of GameStop Corp.’s wild roller coaster ride on the New York Stock Exchange, people have been talking about retail investing and how social media is changing the game.

The video game retailer’s stock price hit a high of $483 in what has been framed as a battle between “the little guys” of Reddit against the suits of Wall Street who had heavily shorted GameStop shares.

In this episode of B-Side, Edward K. Lee, chairman and founder of COL Financial Group, Inc., speaks with BusinessWorld reporter Revin Mikhael D. Ochave about short selling, GameStop shares, and the Philippine stock market.

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TAKEAWAYS

Know the rules of the game.

“Whatever it is you are doing, you have to know the rules of the game–how it should really be done,” said Mr. Lee.

“People are opening accounts just to speculate. They are just gambling, without understanding how they do it,” he said. “Are you a passive investor, an active investor, or an active trader? A person should understand the rules clearly. You should know and apply the rules because if not, you can make so much money in one day, but it can all disappear in a snap.”

Be wary of ‘the madness of the crowd.’

A majority of people who trade in penny stocks lose money, said Mr. Lee. “People go with the trend without even knowing what they are buying. As long as the stock price goes up, they just buy stocks and go with it. Yes, you can win a lot. But eventually, you can lose a lot also. So they have to really be careful,” Mr. Lee said, who warned against the “madness of the crowd.”

Keep an open mind and an optimistic mindset.

“If you have time, the stock market is a good thing to learn,” Mr. Lee said, who advised those who are interested to open their minds, read up, and trade systematically. Trading and investing in the stock market is a skill, he added, that can “put the world at your fingertips.”

“What is important for most investors is that they have to keep an open mind. They have to use this pandemic as a means of opportunity. Those planning to invest or trade need to have an optimistic mindset. If you do not have an optimistic mindset, nothing will happen to you,” he said.

This episode was recorded remotely on February 2. Produced by Nina M. Diaz, Paolo L. Lopez, and Sam L. Marcelo.

Related story: The Philippine Stock Exchange (PSE) will allow short selling as soon as issues on borrowing and lending of securities before the Securities and Exchange Commission and tax bureau are resolved. “The probability of a GameStop incident happening in the Philippines is quite small, if not nil,” said PSE President Ramon Monzon said.

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