In January an insurrection took place, making headlines across the world.
In many ways the GameStop short squeeze mirrored the Capital Hill riots: huge numbers of people came together, angry at their stake in society, to take on what they saw as the ‘elites’
The short squeeze
At the start of the year, GameStop seemed to be struggling financially. The American brick-and-mortar video game retailer had lost value as digital sales for games increased and the pandemic had worsened the problem, by closing stores for their remaining customers.
Given its poor situation and potential to suffer further, multi-billion-dollar hedge funds took out short positions on GameStop. This is a kind of gamble, that the price of a share will drop.
It seemed like a good bet, but the internet had another idea.
Members of the WallStreetBets forum on Reddit flooded in to buy shares and protect the company’s finances.
The resultant increase in share price triggered a buying frenzy, fuelled in part by tweets from high profile celebrities such as Tesla CEO Elon Musk.
At its peak, the price of a single share of GameStop sky-rocketed from $18 a share to $483 by late January.
One hedge fund, Melvin Capital, lost more than $7 billion when its short bet went wrong.
WallStreetBets: Money and nostalgia
The WallStreet bets forum increased in size to ten million users during the pandemic.
The huge membership gave the forum a huge buying power but the motivations of its traders varied.
Dean Nixon is a trader in the WallStreetBets forum, from Toronto, Canada. To him, the short squeeze was a way to get back at the financial elite.
“I said to myself I’m just going to buy whatever I can buy, and if I’ve got to set it on fire to cost the hedge funds money I’m going to do it”.
“I’ve always felt the people with a lot of money and resources manipulate the outcome of the game, and it seems that they’re doing this in the stock market too”.
Dean Nixon found the WallStreetBets forum and online trading during the pandemic. Credit: Theo Whyte
Many investors in the WallStreetBets forum echoed this sentiment, but not all.
A small but influential group in the forum were those whose prior financial success allowed them to invest huge sums into GameStop.
Their advice and analysis was often influential in getting other smaller investors to buy shares.
A rising star in the forum goes by the username Lookshee. Some of his fellow influencers, such as Boston based trader Keith Gill, are currently being sued for market manipulation. To avoid a similar fate, Lookshee asked to remain anonymous.
Unlike Dean Nixon, Lookshee did not care about costing the big hedge funds. To him, GameStop was just another sound investment:
“I was looking at the fundamentals of the company, I was just thinking man, this is a good investment. I would be a fool not to just liquidate everything else I own, and just make this the only play”.
Lookshee laughed as he said this, knowing that his fellow Redditors would label his potentially risky decision as a “YOLO” (you only live once) trade. Even if he did not see it as such.
However, like many in the forum, Lookshee was also motivated by something else: nostalgia.
“I’ve been a gamer since forever, I pretty much grew up in my friend’s basement playing video games”.
He continued: “This is a thing for me. I like GameStop and I want to be a part of this transformation”.
Legacy:
January’s trading frenzy sent shockwaves through the financial world, but what will the short squeeze mean in the long run?
Julien Messias is the co-founder of Quantology Asset Management, a Parisian hedge fund that made money during the short squeeze.
“For a long time hedge funds have been able to make money quite easily by betting on the collapse of [companies like GameStop]”.
“But the eruption of new players, such as the day traders and the Redditors, has changed dramatically the way [hedge funds] think”.
Hedge funds, he says, will now think twice before targeting beloved brands.
But Redditors like Dean Nixon say this represents more than just money.
“WallStreetBets and platforms like that are showing people there are alternatives to just the daily grind of punching a clock, go to work, come home”.
He says the event will give agency to those that feel left behind. Showing people “that we do have ways to explore and new ways we can generate wealth”.
Lookshee says that this belief internet traders now have: that they truly can rock the boat, is going to have a lasting legacy.
“The apes are never going to give up on this.”
“The people who either lost money, or believe in the change that is to come, they are never going to give up”.
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Headline‘Never going to give up’: GameStop, Reddit and the day trading revolution
Short HeadlineThe Retail Revolution: GameStop and WallStreet Bets
StandfirstCity News explored who these unlikely online revolutionaries were and what motivated them.
In January an insurrection took place, making headlines across the world.
In many ways the GameStop short squeeze mirrored the Capital Hill riots: huge numbers of people came together, angry at their stake in society, to take on what they saw as the ‘elites’
The short squeeze
At the start of the year, GameStop seemed to be struggling financially. The American brick-and-mortar video game retailer had lost value as digital sales for games increased and the pandemic had worsened the problem, by closing stores for their remaining customers.
Given its poor situation and potential to suffer further, multi-billion-dollar hedge funds took out short positions on GameStop. This is a kind of gamble, that the price of a share will drop.
It seemed like a good bet, but the internet had another idea.
Members of the WallStreetBets forum on Reddit flooded in to buy shares and protect the company’s finances.
The resultant increase in share price triggered a buying frenzy, fuelled in part by tweets from high profile celebrities such as Tesla CEO Elon Musk.
At its peak, the price of a single share of GameStop sky-rocketed from $18 a share to $483 by late January.
One hedge fund, Melvin Capital, lost more than $7 billion when its short bet went wrong.
WallStreetBets: Money and nostalgia
The WallStreet bets forum increased in size to ten million users during the pandemic.
The huge membership gave the forum a huge buying power but the motivations of its traders varied.
Dean Nixon is a trader in the WallStreetBets forum, from Toronto, Canada. To him, the short squeeze was a way to get back at the financial elite.
“I said to myself I’m just going to buy whatever I can buy, and if I’ve got to set it on fire to cost the hedge funds money I’m going to do it”.
“I’ve always felt the people with a lot of money and resources manipulate the outcome of the game, and it seems that they’re doing this in the stock market too”.
Dean Nixon found the WallStreetBets forum and online trading during the pandemic. Credit: Theo Whyte
Many investors in the WallStreetBets forum echoed this sentiment, but not all.
A small but influential group in the forum were those whose prior financial success allowed them to invest huge sums into GameStop.
Their advice and analysis was often influential in getting other smaller investors to buy shares.
A rising star in the forum goes by the username Lookshee. Some of his fellow influencers, such as Boston based trader Keith Gill, are currently being sued for market manipulation. To avoid a similar fate, Lookshee asked to remain anonymous.
Unlike Dean Nixon, Lookshee did not care about costing the big hedge funds. To him, GameStop was just another sound investment:
“I was looking at the fundamentals of the company, I was just thinking man, this is a good investment. I would be a fool not to just liquidate everything else I own, and just make this the only play”.
Lookshee laughed as he said this, knowing that his fellow Redditors would label his potentially risky decision as a “YOLO” (you only live once) trade. Even if he did not see it as such.
However, like many in the forum, Lookshee was also motivated by something else: nostalgia.
“I’ve been a gamer since forever, I pretty much grew up in my friend’s basement playing video games”.
He continued: “This is a thing for me. I like GameStop and I want to be a part of this transformation”.
Legacy:
January’s trading frenzy sent shockwaves through the financial world, but what will the short squeeze mean in the long run?
Julien Messias is the co-founder of Quantology Asset Management, a Parisian hedge fund that made money during the short squeeze.
“For a long time hedge funds have been able to make money quite easily by betting on the collapse of [companies like GameStop]”.
“But the eruption of new players, such as the day traders and the Redditors, has changed dramatically the way [hedge funds] think”.
Hedge funds, he says, will now think twice before targeting beloved brands.
But Redditors like Dean Nixon say this represents more than just money.
“WallStreetBets and platforms like that are showing people there are alternatives to just the daily grind of punching a clock, go to work, come home”.
He says the event will give agency to those that feel left behind. Showing people “that we do have ways to explore and new ways we can generate wealth”.
Lookshee says that this belief internet traders now have: that they truly can rock the boat, is going to have a lasting legacy.
“The apes are never going to give up on this.”
“The people who either lost money, or believe in the change that is to come, they are never going to give up”.
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