One of the biggest story in the financial markets in history has just happened this week. The drama involving GameStop, a struggling video-game retailer has pitted a bunch of online investors against big-money hedge funds and online investors crushed the Wall Street.
The simplest explanation for what happened is that a bunch of hyper-online mischief-makers in Reddit’s r/WallStreetBets forum — a clan of self-described degenerates with user names like “dumbledoreRothIRA” and “Coldcutcombo69” — decided it would be funny and righteous (and maybe even profitable, though that part was less important) to execute a “short squeeze” by pushing up the price of GameStop’s stock, entrapping the big-money hedge funds that had bet against it.
The strategy worked. Within two days, GameStop was the most heavily traded stock in the world. The scheme’s originator, who goes by a username DeeF—kingValue on Reddit, claims to have turned an initial investment of $50,000 into a windfall of more than $40 million. The combined loss of hedge funds who betted against GameStop is estimated to be over $19 Billon.
Depending on whom you ask, the GameStop saga is either a story about a bunch of reckless nerds destabilizing the stock market for laughs, or a David-and-Goliath morality tale about a fearless band of retail investors cleverly putting one over on corrupt financial elites. The truth is somewhere in the middle.
To summarize what happened to GameStop stock price:
Keith GillA youtuber named Keith Gill, a 34-year-old Massachusetts dad, also known as “DeepF—kingValue” on the Reddit forum WallStreetBets, made a post about his single $53,000 investment in GameStop in mid-2019.
Getting little attention, he began tweeting frequently about GameStop and making YouTube and TikTok videos about his investment. He also started livestreaming his financial ideas.
His idea started to get more support and when over 75 million individual investors moved in unison, GameStop’s stock price shot up. In mid-December, the price was a meager $15 a share (that is already more than double what Gill paid). On January 12, it began its meteoric rise.
Believing the price will crash soon, short sellers doubled down on their bets. But when Elon Musk tweeted “Gamestonk!” on January 26, GameStop’s price went from $150 to $230, further deepening shorter’s wounds. It peaked at 467 on the 28th, an almost 1,000% increase from a week ago. But all of this excitement came screeching to a halt on January 28 when popular brokerages Robinhood and TD Ameritrade issued trade restrictions on GameStop.
GameStop price took a nosedive as low as $126 but after restrictions were loosened the next day, it climbed back up to $250 and closed out the week at $325.
There are so many angles on this story but one thing seems clear. Social media has influenced fashion, politics, arts and entertainment, and just about everything in our lives. But the Wall Street has been reserved to a few elites. With the advent of no-fee trading services like Robinhood, the mass is now able to participate and influence the stock market. And this week’s GameStop saga clearly shows a new game is afoot in the financial market. The Wall Street will never be the same.
The strategy worked. Within two days, GameStop was the most heavily traded stock in the world. The scheme’s originator, who goes by a username DeeF—kingValue on Reddit, claims to have turned an initial investment of $50,000 into a windfall of more than $40 million. The combined loss of hedge funds who betted against GameStop is estimated to be over $19 Billon.
