Redditors, individual investors, and GameStop fans who have stepped aboard the video game company's soaring stocks have plenty to celebrate. After all, stocks have catapulted from $ 17.25 at the start of the year to over $ 320, a surge that has spawned many paper millionaires. But make no mistake, the movement that is fueling this rally isn't about shrewd financial tactics or goodwill for a once-loved retailer and mall. It's about righteous anger.
When the Reddit stock trading community WallStreetBets put in a coordinated effort to boost GameStop stock, part of the appeal was the idea to destroy short sellers - investors placing bets on a stock's decline - and thereby destroy the broader financial institution. GameStop was a particularly attractive target because it was the most severely shortened stock. But it's just as much about making money as it is, as one Redditor put it, and doing it so that "the old people drown in their tears".
The collective effort has proven successful in part because it has the same kind of frustration and feeling of clinging to the man who fueled the Occupy Wall Street movement, which responded to the Occupy Wall Street movement nearly a decade ago extreme wealth of the "1 percent" against everyone else. This feeling has the same power 10 years later.
"In a sense, this is Occupy Wall Street through the trading desk, not Zuccotti Park," said David Kirsch, professor at the University of Maryland's Robert H. Smith School for Business.
The only difference in this case is that the 99 percent corporations are making the massive profits while the Wall Street titans are experiencing a real upheaval in investment norms. You will not see protesters in tents or holding up signs. Beyond GameStop, BlackBerry, AMC Entertainment, and other ex-stock traders are making big gains, if not as dramatically. Stock market analysts don't know what all of this means and where these stocks are going.
"Nobody cares what a sell-side analyst is saying" Michael Pachter, a longtime video game industry analyst at Wedbush Securities, told my colleague Ian Sherr. He characterizes the rise in stock prices as a Ponzi scheme that recruits new investors to unwittingly fund false returns for previous investors, making the investment appear legitimate.
Make no mistake about it: the rise in GameStop stocks is highly unusual. But the effort behind it is not. It's the latest example of how an online community gains momentum through a shared mission. We saw it had a frightening effect earlier this month when the U.S. Capitol stormed after weeks of online chatter questioning the legitimacy of the elections. This was concluded with a live speech from President Donald Trump.
This stock activity doesn't compare to the treacherous attack on democracy, but there is a common line of passage not only with the DC insurgency, but also with the hacktivist collective Anonymous, Bernie Bros, and even the baseless conspiracy theory, QAnon. These extremely diverse groups are all exploiting the idea of fighting a corrupt system that you believe is kidding you. You take advantage of the anger and frustration that comes with this mindset. For the most part, the island culture of message board interactions will fuel the mood his own slangA trend that has sparked the rise in extremism in this country.
This idea surfaced again Robin Hood, TD Ameritrade and others Put restrictions in place that made it difficult or impossible to buy GameStops stock, along with other "meme" stocks like AMC. The restrictions caused wild fluctuations in stock prices and sparked outrage among individual investors, fueling sentiment that Robinhood and other hedge funds were protecting that were at risk from their short positions. Robinhood allowed "limited purchases" Friday but the damage was done: the Securities and Exchange Commission said it would look into the situation and disgruntled individual investors ravaged the brokerage firm.
Meanwhile, protesters reappeared on Wall Street I remember the Occupy movement from a decade ago.
But there has been ugliness on both sides, an unsurprising development as Reddit channels the same unbridled energy as anonymous message boards. Andrew Left, founder of the investment newsletter Citron Research, had his personal information shared by disgruntled traders who texted him and his two children, according to The Wall Street Journal.
A poster on Reddit characterized the urge to move GameStop forward as a "war" in a comment that was later abolished. Another Reddit post picks up excruciating detail on the pressures short sellers and investment firms are feeling. "This is their Armageddon," they say. Those were the more polite things they said.
Other than ugliness, the key question is whether this is a coincidence or a real disruption to the financial system. Will this ruin the practice of short selling a stock, or at least make short sellers look over their shoulder for another GameStop-like run that would decimate their holdings? Or is a growing group of mostly young people consuming financial information in this way and turning investing into a game?
"We are seeing that 3 million small investors in a Reddit forum, when acting in a coordinated fashion, can seriously distort regular price movements," Kirsch said.
The truth is things have already changed. The popularity of apps like Robinhood, which has gamified investing, and the fact that millions of people are locked in their homes with little else to do, has changed the complexion of stock trading.
Billionaire tech investor Chamath Palihapitiya said on CNBC that the Reddit rebellion against the Wall Street establishment represents a fundamental shift in philosophy. "Instead of having 'idea dinners' or quiet, whispered conversations amongst hedge funds in the Hamptons, these kids have the courage to do it transparently in a forum," he said. "What it proves is this retail [investor] Phenomenon is here to stay. 2.7 million people live in WallStreetBets. I think they're just as important as any hedge fund hedge or collection. "
However, the increasing number of casual investors jumping on this missile ship also begs the question of who will be burned to death when it inevitably crashes. GameStop is facing fundamental challenges as a company - have you recently been to a mall? - and at some point its share price and market value will be translated into reality.
GameStop backers got a little scared after the WallStreetBets subreddit was momentarily suspended and its community locked on Discord, causing stocks to dip into off-hours trading on Wednesday night before finally bouncing back on their closing price with a dramatic whip fell behind.
Until GameStop crashed, Redditors continued to cheer for the dismantling of traditional investment institutions. Just a decade later, Occupy Wall Street protesters are getting exactly what they wanted.
