GameStop: One year after the ‘War on Wall Street’ and the rise of ‘meme stocks’ | Economic news
They wanted to bring down Wall Street.
It was David facing off against Goliath – amateur investors who clashed with the power of the financial system.
One year after the GameStop Phenomenon and interest in the “meme stock” has not died out.
“I call it ‘events’ because so much happened that month,” says GameStop: Rise of the Players producer and director Jonah Tulis.
The documentary, which hit US theaters this week, follows GameStop investors as their shares explode into international news.
“It was a moment. It was the start of a new era,” says the 31-year-old.
The saga began in January 2021 when youhe struggling video game retailer has seen an unprecedented rise in its share price.
Amateur investors, or individuals, communicated on social networks, in particular Reddit, and created a renewed interest in the company.
They believed the market was undervaluing the “bricks and mortar” computer game store and rallied behind it, forcing the stock price higher with their purchases.
“It was crazy…they acted on instinct. It was impossible at the time to assess what retail investors could do,” says Tulis.
These investors had also realized that the big hedge funds were “shorting” GameStop – they were betting against the rise in value.
So when the opposite happened and the value rose, they took a big hit, losing billions of dollars – and the “war on Wall Street“Storytelling was born.
By mid-month, shares of the company had soared more than 500% year-to-date, with many claiming online Reddit group r/wallstreetbets was responsible.
“Overall, our subjects made life-changing money – in the millions. And they weren’t rich people to begin with,” adds Tulis, who also directed the Console Wars film.
“The End of the Wild West”
Today, many on the r/wallstreetbets Reddit thread are optimistic that this was not a one-time phenomenon.
The mostly well-informed community of amateur traders now has over 11.5 million followers.
There will “definitely be major fireworks in late January early February,” read one comment.
“Only if you spread the word and make it a real event. Imagine the campaign we can do to advertise the anniversary,” said another.
Despite the continued hype, GameStop stock prices have been falling since the start of this year.
Other “meme stocks” like movie chain AMC Entertainment are also still buzzing about, despite the stock price almost returning to its pre-hype norm.
Some users seem pessimistic about the future.
“It’s probably the end of the Wild West,” wrote one.
There are “difficult days ahead”, says another, referring to higher interest rates on the horizon, which would dampen stock market gains.
“A few will succeed on meme stocks, but most will lose a lifetime of savings,” one warns.
These are thoughts echoed by some experts.
Investing for profit “can be like a pyramid scheme in that the former make a lot of money, the latter are the suckers and they get burned,” says Dr Jorge Guira, associate professor at the University of Reading .
He thinks pandemic lockdowns played a big role in the phenomenon.
“GameStop has done relatively well compared to before, but it’s down 35%, more than the S&P 500 which has fallen 10% this year,” he adds.
“It seems to reflect that people are now living more regular lives, rather than acting on the ‘boredom market hypothesis’ where people express themselves through these trades.”
The day the “Buy Button” was disabled
On January 28, 2021, trading app RobinHood temporarily restricted the buying of certain volatile stocks, including GameStop, in a move that sparked outrage.
Many felt this was unfair.
The company explained that it was compelled to take steps to ensure that it could meet its requirements as a broker with the unprecedented trading volume.
“We never want our customers to be surprised by trade restrictions again,” he said in a statement this week.
RobinHood continues to make changes to its operations in response to the saga, doubling its customer support team and strengthening its compliance and risk infrastructure.
“The retail investment revolution has shown us that a new generation of investors wants their voices heard,” he added.
“Our work has only just begun.”
Regulatory reform could be coming
The U.S. Securities and Exchange Commission (SEC), a government agency founded to prevent market manipulation, has proposed reforms as part of its investigation.
It could introduce stricter rules for hedge funds to improve the transparency of their activities.
“We can certainly expect the SEC to do something,” says James Angel, professor of finance at Georgetown University’s McDonough School of Business.
“Those who engage in short selling say more disclosure will make them public targets…and I think they are right, but at some point there has to be the right amount of disclosure. Right now we have too few.”
A new era in investing for ordinary people
On Reddit, “living room investors” doubt that Wall Street is afraid of it.
“The big dawgs dominate the market,” one warned, “and most retailers who play this game lose.”
Despite these sentiments, there remains a loyal community of enthusiastic investors who support GameStop.
Tulis thinks it’s the start of a trend that won’t go away.
“There’s something special about how people find companies they believe in — companies they’re connected to,” he says.
“When I think of AMC or GameStop, there’s an automatic sense of comfort.”
“Things have changed so much – you no longer have to call a broker to buy a stock.
“It’s so much more accessible and it’s going to allow a lot more people to invest with their hearts, whether for better or for worse.”
GameStop: Rise of the Players is set to release internationally later this year.