Barely a month into 2021 and it is already proving to be a very bizarre year in more ways than one, but perhaps the strangest story that we’ve seen in a long time involves Reddit users squaring off against Wall Street tycoons.
So, to put it in as simple terms possible, a popular subreddit called r/WallStreetBets managed to successful bump up the stock of GameStop, a gaming retailer in the US, after they learnt that traders were betting that the store’s stocks were going to plummet.
Members of the Reddit page piled in to GameStop in order to push up the share price to inflict losses on hedge funds who were betting against the stock (think: The Big Short – if share prices went down, they made money, if they went up they lost it).
This week the retailer has seen its stocks open at $88 (£64) rising to a high of $354 (£259) after Elon Musk tweeted a link to the Reddit discussion. This has seen GameStop’s three largest stakeholders earn over $2bn, despite the “real” value of the company remaining unchanged.
Melvin Capital had to short sell its shares after pouring in $3bn, as a result of the surge in investment. Hedge funds and others that bet against GameStop have collectively lost more than $5bn, according to data analytics company S3.
Essentially, folks on Reddit managed to troll hedge fund investors by investing in a high street store that looked like it was going bust. There are now concerns that something similar may happen with other companies, including BlackBerry and cinema chain AMC.
To prove how ‘up in arms’ Wall Street is about this, here’s a rant from Fox Business host Charles Payne on the topic.
It’s quite possibly one of the oddest stories we’ve seen in years and lots of people were rejoicing in the outcome, seeing it as a David and Goliath tale wherein a bunch of people of Reddit managed to outsmart billionaires.
As news was announced that the government was “monitoring” the situation – which appears to be legally and ethically murky – people found the whole thing even more absurd.
The whole situation is so complex that most people’s main reaction was “sorry, what?" Not understanding GameStop may be the meme of the day.
And for some people, this in itself was evidence that the system is broken.
While some people pointed out that the situation could have broader ramifications for the economy and people’s jobs, others had little sympathy.
How long this will continue for remains to be seen as the r/WallStreetsBets Reddit has now been set to private and Discord has even banned the server after it failed to prevent hate speech despite being warned.