Most Prominent Events of 2021 in Stock Market
7 minutes for reading
The year 2021 turned out to be packed with stock market events. This year, unbelievable things used to happen to the shares of certain companies. The shares of issuers on the verge of bankruptcy sky-rocketed by thousands of percent and, most surprisingly, never returned to their initial levels. Let us be consistent, however.
This year can be called the year of a retail investor. The development of IT, popularity of mobile phones and apps let everyone who has Internet access and decisiveness play their part in the stock market.
Over the year, public brokers were reporting all-time high numbers of accounts registered by private investors. This, in turn, was a positive influence on the stock price of companies because new money was coming to the stock market, looking for new investment goals. Since the beginning of the year, S&P 500 index has grown by 27%, and private investors played their part in this movement.
Naturally, there were situations where private investors were most aggressive.
GameStop and WallStreetBets users
On January 13th, 2021, the shares of GameStop Corp (NYSE: GME) grew by almost 90%. This looked like nothing special because such things happen in the stock market every day. However, 10 days later, the shares were trading 2,200% higher than at the start. This was, indeed, a rare occasion. What happened?
GameStop is a network of offline shops selling computer games, consoles, and game accessories. Movies and games on disks are gradually becoming outdated: any game for your PC or console can be bought online in a game shop; movies can be watched online by subscription or in online cinemas. The business model of GameStop was expiring, and they failed to make their business online in time.
As a result, the shares of the company have been falling since June 2015. The problem became even more acute after quarantine measures were imposed across the USA due to COVID-19. Major market players, anticipating the bankruptcy of the company, counted on the decrease in the share price. There were so many short positions that if the shares started to grow, this would have made the sellers close their positions, i.e. buy the shares.
The imbalance was noted by the users of the WallStreetBets group, and they rushed at buying GameStop shares directly and via options. Counting on options, they made market-makers buy the shares to hedge their risks.
In the end, the demand for shares lifted their price. This did not scare off the sellers, and they just added more short positions. Then total chaos started.
Brokers loaned the shares from each other and offered them to clients for sale to satisfy the demand. There were more shares in short positions than there were in circulation. When the sellers realized the trouble they had got themselves in, they started buying the shares to close their losing positions.
As a result, the share price leaped up by 2,200%. Then regulators intervened to carry out an investigation but this is a different story.
Chasing easy profits
Most importantly, after such a surge in the price, the Internet got full of posts about private investors making millions of profit. Greed made people search for other shares that could go by the same scheme. One “victim” were the shares of a movie house chain AMC Entertainment Holdings, Inc. (NYSE: AMC); its losses during the pandemic grew from 150 million USD to 4.5 billion USD, while its shares grew by 3,600%.
When there were no more options left in the US market, private investors switched to Asia and Europe, so news about surges in stock prices started coming from there.
All companies that felt increased demand for their shares were losing, with almost no chances for recovery. So, upon sky-rocketing, the quotations returned to their normal levels.
However, GameStop shares are still trading 600% above the levels o the beginning of the year. Thanks to this, the company made billions of dollars of profit on selling stocks, yet the business never became profitable. According to the latest quarterly reports, losses are only growing. The behavior of the shares has no inner logic, yet it is a fact.
Non-Fungible Tokens
Another way of making easy money in 2021 became chasing companies that could profit from introducing NFT.
A Non-Fungible Token is a digital certificate that fixes ownership and confirms the unique state of digital assets.
In spring, this issue became extremely topical, and investors rushed at buying the shares of Takung Art Co., Ltd. (AMEX: TKAT).
Takung Art Co., Ltd. is a company that manages an online platform for artists, art dealers, and art investors. A sharp increase in the demand for these shares made them grow by 2,600% over 9 days.
Dolphin Entertainment Inc. (NASDAQ: DLPN) also turned out in the focus of attention. The company works with entertainment marketing and premium content development. Its shares grew by 465% over 2 days.
In the end, however, the shares of both companies returned to their initial levels. The agitation subsided, so there was no one to support the growth anymore.
Electric cars
There were more reliable and predictable investments in 2021. For example, a popular topic of 2021 was an active shift from combustion engine vehicles to electric cars. Thanks to this trend, the shares of electric car makers enjoyed active demand. Car-making giants, such as Ford (NYSE: F), General Motors Company (NYSE: GM), and others hurried to announce transition to electric car-making.
Ford shares that previously hit the record in 1999 and had never neared those levels ever since, renewed the high in 2021. General Motors shares even exceeded the highs by 60%.
This year, beginners in the industry tried to carry out an IPO as fast as possible, while the issue of electric cars remained topical. For example, Lucid Group, Inc. (NASDAQ: LCID) in 2021 became public via merging with a SPAC Churchill Capital IV, and its share price leaped up by 500%.
The shares of Rivian Automotive, Inc. (NASDAQ: RIVN) after an IPO grew by 70%. However, investors are beginning to realize that the plant for 400,000 electric cars a year, which Rivian is planning to buy, will make the first cars in 2024 only. Optimism subsided, and the demand for the shares alike.
The shares of the main player in this market – Tesla (NASDAQ: TSLA) – set a new price record in 2021. The quotations reached 1,250 USD per share, and this is with the split of 1 to 5 last year.
Hydrogen companies
And, of course, the year 2021 cannot be described without the green energy transition. The topic is global, yet the most of attention should be paid to hydrogen companies. The most popular shares were FuelCell Energy (NASDAQ: FCEL). This company makes ecologically clean hydrogen and fuel elements. The shares grew by 190%.
The shares of another hydrogen company Plug Power (NASDAQ: PLUG) rose by 150%, the shares of Ballard Power Systems Inc (NASDAQ: BLDP) – by 90%. These issuers, unfortunately, generate no profit.
In 2021, the losses of some of them grew 6 times. So, when investors got rid of information noise and checked for financial performance, the number of investors in the companies decreased noticeably. The shares started falling and are now trading lower than a year ago.
Closing thoughts
Market players will be long remembering 2021 because that year many of them made their first profits. Beginners felt how easy it might be to make money, investing in fast-growing companies, and simultaneously got the bitter experience of chasing desired assets, failing to buy them before growth. All this is the intrinsic part of trading.
Now 2022 is coming, and it will be different from this year because the world is now nervous about growing inflation and the ways to solve this problem. However, investors will keep looking for easy money, coming up with short-term investments ideas. Only now they will account for the experience of 2021.
* – Past performance is not a reliable indicator of future results or future performance.
The material presented and the information contained herein is for information purposes only and in no way should be considered as the provision of investment advice for the purposes of Investment Firms Law 87(I)/2017 of the Republic of Cyprus or any other form of personal advice or recommendation, which relates to certain types of transactions with certain types of financial instruments.
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