Salvador Vergara was so excited about GameStop Corp in late January. that he took out a $ 20,000 personal loan and used it to buy stock. Then the effervescent stock fell nearly 80%.
GameStop’s fleeting ride hits the wallets of individual investors like Mr Vergara who bought the stock in a social media-fueled frenzy. These casual traders say GameStop was their “YOLO” or “you only live once” trade. They bought around the late January peak, betting it would continue its astronomical climb. While some paid out before it crashed, others who held on to their stocks are in the red.
Mr. Vergara, a 25-year-old security guard in Virginia, started investing four years ago after deciding he wanted to retire young. To save money, he drives a 1998 Honda Civic, eats a lot of rice and lives with his father. He mainly put his savings into diversified index funds, which are now valued at around $ 50,000. Then Mr. Vergara, a longtime reader of the WallStreetBets page on Reddit, saw others posting about buying GameStop stock and the boom in the stock.
He didn’t want to touch on his investments in the index fund, so he instead got a personal loan at 11.19% interest from a credit union and used it to finance most of his GameStop purchase. He bought stock for $ 234 each.
GameStop shares started the year around $ 19, zoomed in to close to $ 350 in late January (and hit close to $ 500 in intraday trading), then started to roll back to Earth. Shares closed at $ 52.40 on Friday, down 85% from the peak close.