GameStop: How a fight between Reddit users and Wall Street bankers saw video game company’s stock increase tenfold

  • Source: Independent


    Video game retailer GameStop’s stock price has increased dramatically due to the actions of users on the WallStreetBets subreddit.


    The Reddit users pushed the stock up from $20 on 11 January to a staggering high of $146.97.


    The general reason for this is because the stock market is subject to wild speculation that can deem companies like Tesla, for example, more valuable than the nine largest automakers combined.


    The more specific reason is that the company found itself as the central catalyst in a battle between short-sellers and online traders.


    What is GameStop?


    GameStop is a US video game retailer. In the midst of the pandemic, when the company’s physical stores have struggled, it has become a target for amateur traders.


    The store was not expected to turn a profit before 2023, but has seen its market value triple to $4.5 billion in three weeks, Bloomberg reports.


    What is r/WallStreetBets?


    WallStreetBets is a subreddit – a small community – on the social media app Reddit. Users of the platform have taken to trading stocks over the past several months, who treat the market as a “roulette wheel” rather than any long term wealth strategy, Vox reports.


    The subreddit is described as the "Wild West of investing advice," or “like 4chan found a Bloomberg terminal”, with over one million subscribers to the page.


    The community has had successes historically, such as exploiting a breach in a trading app that allowed for infinite leverage, but others have lost huge amounts of money in a group that takes glee in all-or-nothing ventures.


    What happened to GameStop’s stock?


    GameStop’s stock, as one Reddit moderator told Wired, was “a meme stock that really blew up.” The company was struggling financially both before and after the pandemic, with many analysts suggesting short-selling the stock to profit off its decline.


    However, as Ars Technica reports, investor Ryan Cohen – who had previously invested in safe stocks such as Apple - bought a ten per cent stake in the retailer, a move which attracted notice. Cohen purchased enough to reach the board of directors, and pushed the company to expand its ecommerce prescence.


    As the stock increased, short sellers found that they had to buy more stock in order to cover their borrowing, Wired reports. This is known as a “short squeeze”, when investors who have bet against a stock rising try to cover their loss and the price of the stock increases.


    Ultimately, because GameStop looked like it was going to fail but did not, the perverse situation meant that individual stock buyers on WallStreetBets started pushing the stock upwards.


    What happened with Citron Research?


    The invested advice on Reddit laid the foundation for GameStop’s renewal, but it was the prospect of a battle against traditional short sellers that really drove the most unusual behaviour around the GameStop stock.


    Citron Research founder Andrew Left, as Wired reports, suggested that the stock would drop from $41 to $20. “We understand short interest better than you and will explain,” he said in a now-unlisted video, and that he had never seen “people so angry about someone showing the other side of a trade” on a “failing mall-based retailer” .


    This reportedly triggered tensions between WallStreetBets and Citron Research, with Reddit users essentially buying into the stock out of spite, fighting against the traditional Wall Street view that markets are driven by fundamental values, according to Corey Hoffstein, chief investment officer of quantitative investment and research firm Newfound Research, who spoke to Wired.


    The response to the dispute simply pushed the stock higher, with GameStop closing out on $65.01 on Thursday. Although that will likely not be sustainable as WallStreetBets finds other interests, those who did buy into the hype market have seen an on-paper profit from their moves.


    According to Bloomberg, one WallStreetBets user claims he rolled a nearly $55,000 investment in GameStop call options into an $11.2 million paper fortune with Bawse1, a WallStreetBets moderator, telling Wired that this is the first time in years on WallStreetBets that “everybody was making money.”

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  • AMC is today's GameStop. A Reddit mob sent its stock more than 200% higher


    Source: CNN Business


    A group on Reddit's Wall Street Bets board have been promoting a number of stocks, hoping to squeeze short sellers that have been betting against them.

    They're succeeding. Their best-known bet is GameStop (GME), which rose another 133% Wednesday after nearly doubling Tuesday. It has now soared about 1,700% this year.


    Today's target: AMC (AMC), the (very) struggling theater chain that just announced a nearly $1 billion lifeline to stay open.

    Shares of the new WSB plaything skyrocketed more than 230% Wednesday after members of the Reddit board and investors on online brokerage firm Robinhood were touting the stock and got #SaveAMC trending on Twitter.


    Both stocks had their trading occasionally halted for volatility Wednesday. And the dramatic spikes caused at least one top online broker, TD Ameritrade, to curb trading in the two companies.


    "In the interest of mitigating risk for our company and clients, we have put in place several restrictions on some transactions in GameStop, AMC and other securities," said a spokesperson for TD Amerirtrade, which is no owned by Charles Schwab (SCHW).


    "We made these decisions out of an abundance of caution amid unprecedented market conditions and other factors," the TD Ameritrade spokesperson added.


    AMC is struggling financially -- just like GameStop -- and is a favorite stock of short sellers. AMC wasn't exactly a top performer before the pandemic, and the massive drop-off in theater attendance over the past 10 months sent it scrambling for cash. Last year, the company said it doubted its ability to stay in business.


    But AMC's CEO told CNN Business Tuesday he is now hopeful (after an influx of cash) that the company can ride out the pandemic until people are ready go back to theaters. That's a bold bet -- blockbusters like the new James Bond movie keep getting pushed back, and CNN parent company WarnerMedia pledged to release all of its Warner Bros. titles simultaneously in theaters and on HBO Max.


    Similarly, GameStop may have been oversold and due for a comeback: Investors on social media had been arguing that GameStop was seriously undervalued and cheered earlier this month when the company added Chewy founder Ryan Cohen, who has been pushing a digital overhaul, to its board. Also, video games are a hot commodity in the stay-at-home era, particularly after the launches of the PlayStation 5 and Xbox Series X.


    But GameStop faces many of the same problems that other retailers face. It was struggling before the pandemic, as video games went digital and Amazon began eating into its market share. With malls dying across the world, those fundamentals aren't about to change -- and certainly haven't changed so dramatically in the past few days and weeks to send its stock soaring nearly 700%.


    That's why this Reddit saga isn't just about fundamentals.


    The reason GameStop, AMC, BlackBerry (BB) and a bunch of other stock picks from the WSB group are soaring is because the way people trade stocks has changed dramatically. No-fee apps like Robinhood democratize access to financial markets. Who needs high-paid Wall Street analysts when you can get stock tips for free on Reddit?


    Although the hive mind of WSB poses some real dangers of a bubble mentality, there's no arguing with their success. Short-sellers rushing in to hedge their bets and cover their positions are keeping Reddit's stocks soaring with no signs of stopping.


    Two questions remain: Who's next? And what happens when the bubble bursts?

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  • I am gonna be very honest... I don't understand what's happening

    Neither do I. I'm still reading articles and watching videos to have at least a general grasp of the situation. I get it while watching videos but unfortunately my knowledge retention isn't that good lol

  • Discord bans Wall Street Bets server for 'hateful' content


    Source: PC Gamer


    Wall Street Bets, a meme-heavy community of investors who organize on Reddit, is in the midst of squeezing Wall Street speculators by buying up shares of GameStop like it's 1999. Some of the subreddit's subscribers have also been chatting on Discord, but they may have to find a new place for moment-to-moment communication: The chatroom host says it has closed the group's server due to "hate speech, glorifying violence, and spreading misinformation."


    The Verge says it joined the Wall Street Bets Discord server while it was still active, and did find users "spamming hateful language, including racial slurs." In a statement sent to the publication, Discord said:


    The server has been on our Trust & Safety team’s radar for some time due to occasional content that violates our Community Guidelines, including hate speech, glorifying violence, and spreading misinformation. Over the past few months, we have issued multiple warnings to the server admin.


    Today, we decided to remove the server and its owner from Discord for continuing to allow hateful and discriminatory content after repeated warnings.


    To be clear, we did not ban this server due to financial fraud related to GameStop or other stocks. Discord welcomes a broad variety of personal finance discussions, from investment clubs and day traders to college students and professional financial advisors. We are monitoring this situation and in the event there are allegations of illegal activities, we will cooperate with authorities as appropriate.


    The ban's timing at the height of the group's popular 'screw you' to Wall Street has led to suspicion among some observers that the private chat company was pressured by someone to disrupt its investment activities (or perhaps decided to do so on its own accord). At this time, we don't have evidence of any such pressure.


    The move is in line with Discord's moderation policies, and may simply have been motivated by the behavior observed by The Verge, and the increased attention around the server, which was likely drawing in a large number of new users excited by the news.


    A few years ago, Discord was criticized in multiple reports when it was found that hate groups were organizing on the platform. "In the course of an afternoon, I found and joined more than 20 communities on the platform that were either directly about Nazism or white supremacy or reveled in sharing anti-Semitic and racist memes and imagery," wrote Slate in 2018. Discord shut those servers down, and made it clear that it would continue to shut down servers reported for any similar behavior.


    I spoke to Discord about the topic in 2019, and while the company's Trust and Safety team does not actively monitor every small or private server, it does respond to reports, especially when they come from big public servers.


    On the Wall Street Bets subreddit—which has just been locked in a separate development—users often refer to themselves with derogatory terms.

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  • Neither do I. I'm still reading articles and watching videos to have at least a general grasp of the situation. I get it while watching videos but unfortunately my knowledge retention isn't that good lol

    yeah I am very confused ? i am gonna search for anyone who understand about this because all what I get is "aint money good? whats happening?"

    I am gonna need to search for a tldr later lol

  • yeah I am very confused ? i am gonna search for anyone who understand about this because all what I get is "aint money good? whats happening?"

    I am gonna need to search for a tldr later lol

    A component of the story that caught the internet's fancy is basically these millionaire (billionaires?) hedge fund people are getting screwed over and getting a taste of their own medicine hence the reaction on social media. Kinda like Occupy Wall Street from a decade ago but hurts them where it counts.

  • A component of the story that caught the internet's fancy is basically these millionaire (billionaires?) hedge fund people are getting screwed over and getting a taste of their own medicine hence the reaction on social media. Kinda like Occupy Wall Street from a decade ago but hurts them where it counts.

    I have seen the tweet you shared! now I understand

    tho i don't appreciate being called like that because I am team godzilla

  • Robinhood Faces Class-Action Lawsuit for Blocking GameStop Stock Buys


    Source: PC Mag


    Robinhood is now facing a class-action lawsuit for blocking users from buying GameStop shares in the ongoing “meme stock” craze.


    Hours after the stock-trading app began limiting the share buys, a Massachusetts-based user named Brendon Nelson filed a class-action complaint against the company, demanding it pay up in damages.


    “Robinhood essentially abandoned its customers altogether by pulling GME (GameStop), a standard of care so far below what is required for a business engaging in time sensitive trading services that it amounts to a complete abandonment of its duties,” Nelson claims in the lawsuit, which was filed in a US District Court in New York.


    The same complaint alleges Robinhood broke financial regulations under FINRA by failing to “make every effort to execute a marketable customer order that it receives fully and promptly.”


    "Robinhood is pulling securities like GME from its platform in order to slow growth and help benefit individuals and institutions who are not Robinhood customers but are Robinhood large institutional investors or potential investors," it adds.


    As a class-action lawsuit, the complaint is calling on the court to force Robinhood to pay monetary relief to all affected users. Nelson is also demanding the app reinstate GameStop on the stock-trading platform.


    Robinhood didn’t immediately respond to a request for comment. But the company decided to block share buys for GameStop, AMC, BlackBerry, and five other stocks on Thursday, citing “recent volatility” in the market.


    Indeed, the share prices for the companies had been soaring, thanks to collective action from users on a Reddit forum called r/wallstreetbets, which has over 4.5 million followers. They banded together to purchase stocks that hedge funds bet against. The stock buys caused GameStop to skyrocket from $17 on Jan. 1 to an insane $469 earlier today.


    However, Robinhood's decision to block the stock buys has (ironically) introduced more volatility. For example, GameStop shares have since plummeted to $234 while AMC's share price has fallen by about 40%. Users who own the companies' shares can only sell their holdings.


    The whole situation has caused US lawmakers to call for congressional hearings on the matter. “We now need to know more about Robinhood app’s decision to block retail investors from purchasing stock while hedge funds are freely able to trade the stock as they see fit,” tweeted US Rep. Alexandria Ocasio-Cortez, a New York Democrat.

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