Also published on: https://www.bee.com.au/2021/02/02/taking-back-whats-ours/
Picture this: an online band of rogue Redditors take to the stock market to drive a beaten-down stock sky-high, beating short-selling traders at their own game.
It’s a David-and-Goliath story; a tale of Wall Street versus the little guy, corporate hypocrisy, stock market titans and a previously struggling underdog, GameStop.
Heard of it?
The company ‘taken to the moon’
GameStop is a brick-and-mortar chain of video game stores in the US, publicly listed on the New York Stock Exchange as GME. They’re also the parent company of EB Games, or, the store you’re not sure is having a sale or not.
It was one of many retailers that struggled to stay afloat during the coronavirus pandemic; and given gamers these days can opt for downloaded games instead of buying a physical copy, things were looking grim.
A year ago, GameStop shares were trading under $US4. With a rise of more than 2,400 percent to a peak of $US483 in January this year, it would make sense to chalk such a rise up to astonishingly good performance on the companies part – but it wasn’t.
Enter r/WallStreetBets.
The power of community
Somewhat of a lawless wasteland, r/WallStreetBets (WSB) is a popular subreddit of over 5.7 million members dedicated to the stock market, where users can discuss trades, post stock holdings and make obscure references deeply entrenched in meme culture.
The New York Times describes r/WallStreetBets as “one of the weirder places on the internet” made up of mostly “armchair traders”, where analysis can go on for pages.
It was a year ago a user by the name of DeepF***ingValue (DFV) began recommending GameStop stock through his YouTube channel, and posting a screenshot to the subreddit of a position he’d taken in the company; spending roughly $US50,000 on his initial investment.
By this user’s belief, the company was genuinely undervalued.
“We’re all here dreaming of hitting the big one and quitting the rat race and he f***ing did it”, one user said.
“Just incredible. I wish I had 1/10th of his conviction,” another user wrote.
What followed DFV’s arguably clairvoyant prediction was a surge of WSB users frantically buying GameStop shares like their lives depended on it, driving its price “to the moon”.
Coupled with an encouraging investment of millions from Ryan Cohen, co-founder of successful pet food startup Chewy, the r/WallStreetBets crew rejoiced as positive media coverage began to surge, giving the stock price a boost.
Enter Wall Street.
The long and the short of it
While Reddit’s vagabond traders piled into the stock for a piece of the pie following DFV as their new “king”, Wall Street wasn’t convinced.
Given its past performance and its questionable future amongst the coronavirus pandemic, some of Wall Street’s multi-billion dollar hedge funds including Melvin Capital and Citron Research began betting against the company, talking it down in the hope of making quick cash via the process of shorting.
So what the hell is shorting? We’ve gone ahead and written up an explainer – so, if you’re not sure, read that and come back here.
And if you’re in need of a TL;DR: Wall Street had banked on GameStop shares to fall significantly, but had underestimated the power of amateur traders who bought enough GameStop shares for its price to rise to insane heights. The short-selling hedge funds are now bleeding cash at the seams, and amateur traders are making a point on elitism, camaraderie, and the greed of corporate fat-cats.
“What I think is happening is that you guys are making such an impact that these fat cats are worried that they have to get up and put in work to earn a living,” wrote one of the subreddit’s moderators.
“Suckers at this poker game”
When Citron Research tweeted “GameStop buyers at these levels are the suckers at this poker game” on January 20th, it ignited a long-standing desire within average Joe’s to take down America’s most wealthy, echoing the Occupy Wall Street movement of 2011.
One Reddit member surmised the GME stock craze as “more than just about money”, but about sending a message.
“For all the recessions they caused,” they said. “For all the jobs and homes people have lost. For all the people that can’t pay for college because minimum wage has stagnated while Wall Street gets rich. For all the retail traders they left holding the bag. For all the times they got bailed out with our tax money while we got nothing.
GME isn’t about greed. It’s about taking back what’s ours, what we’ve already paid for.”
“F**k these suits. F**k their pockets. F*** their tears,” another user said.
“We like this stock. Hold the f***ing line.”
What does the end look like?
What can be said of the future of GameStop shares is uncertain, but many notable figures have chimed in to give their two cents.
Elon Musk, CEO of Tesla and beloved meme merchant, encouraged the frenzy in a number of “GameStonk” related tweets this week.
John Winters, chief executive of Superhero, says it’s clear millennial investors are becoming increasingly well-informed of the market and wanting to “control their own destinies”, expecting speculation to continue “given the amount of capital flowing into global markets”.
Perhaps as hype dies down, retail traders will lose money as value deflates, and what could be considered the GameStop movement will become simply a page in the history books.
But who’s to say?
The Internet is one hell of a place.