How Reddit's r/WallStreetBets gamed the stock of GameStop

[techietraveller84]

The biggest topic in US news today--- a group of basement living nerds nearly take down some Wall Street hedge funds that bet against dying retailer GameStop. The world really is changing, and refreshingly, US headlines are again covering topics other than Trump and Covid.

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There are three things to remember as you watch the chaos unfolding with GameStop’s stock price. First, Wall Street is just what happens when you mix money with feelings. Second, the internet is real life. And third, the Street always wins, especially if you’re trading with Robinhood.

 

If you haven’t been paying attention, GameStop’s stock has been soaring in a remarkably volatile fashion; on January 22nd, GameStop zoomed upward 69 percent (nice) before it triggered a circuit breaker halt. The following Monday, January 25th, GameStop trading was halted nine times.

"The idea was to punish short-sellers, and for the little guys to pummel Wall Street"

 

On the surface, this doesn’t make sense. GameStop, founded a year before Blockbuster, is part of a dwindling cohort of IRL businesses that are being starved by online marketplaces. These days, you can just buy video games over the internet instead of going to a soul-killing strip mall in Iowa City to buy a physical copy of the game. GameStop’s business has been suffering as a result.

 

Currently, many people are at home and bored, and consequently, interest in day trading has shot through the roof. There is a Reddit forum for this, r/WallStreetBets, which describes itself as being “like 4chan found a Bloomberg Terminal.” A year ago, a user called delaneydi argued that GameStop was underpriced by the market. For a while, the idea that r/WallStreetBets would take over GameStop was a joke — but then it turned serious, Bloomberg reported. The idea was to punish short-sellers, and for the little guys to pummel Wall Street.

https://www.theverge.com/22251427/reddit-gamestop-stock-short-wallstreetbets-robinhood-wall-street

[najomtiensun]

Very interesting development they are hunting in packs to take down hedge funds that thrive on shorting stocks.Wild times indeed. It's like a game where any one with a hundred dollars or so gets to play...

 

    And so here we are. Reddit traders are “weaponising” financial derivatives against Wall Street, the creators of financial derivatives, in a war of attrition. The contagion has spread to Europe where day traders are on the hunt for the next GameStop. 

Are we looking at the new masters of the universe? Unlikely. But day traders have managed to play hedge funds at their own game and the Schadenfreude is real. 

 

https://www.ft.com/content/eb212606-308a-4351-b786-8f10fdfade96

Edited January 28, 2021 by najomtiensun