Reddit Beats Wall Street at Its Own Game

Photo+Source%3A+Tiffany+Hagler-Geard%2FBloomberg

Tiffany Hagler-Geard

Photo Source: Tiffany Hagler-Geard/Bloomberg

Kaelyn Klatte, Staff Writer

The beloved and nostalgic GameStop is a staple gaming chain, complete with consoles, gadgets, and games. Nearly every mall has a GameStop, conveniently located at its center. And recently, GameStop has become the center of national news.

Late in January, stockbrokers and investors scratched their heads at a strange phenomenon; the stock for a certain, nearly bankrupt company, GameStop, was on a sudden and dramatic rise. Its stock market prices increased 1,700% over the span of three weeks, with its highest jump of 134% on one day alone. Alongside GameStop, Redditors also bought into AMC Entertainment, American Airlines, and similar struggling companies, although none were hyped up to the same extent.

Over the past two years, GameStop—like many other shopping centers—has been struggling financially, closing down stores and edging bankruptcy. However, with the world-wide COVID-19 pandemic shutdown, their precarious situation had only deteriorated.

Thus, keen-eyed investors decided to short sell GameStop stocks. Short-selling is a strategy based on the speculation that a stock’s share price will fall; thus instead of investing and supporting the growth of a company, the investors will profit when the company fails.

The process is completely legal and can be quite profitable in the stock market. Of course, that is assuming that the company, indeed, fails as the brokers and private investors speculated. 

A legion of collegiate Reddit users under the subreddit “r/wallstreetbets”—which had approximately 4 million followers—also noted GameStop’s struggles. In an attempt to save their beloved company, the users banded together and bought a large number of stocks.

Unlike the private investors, they invested in the company, and speculating that the company’s stock would increase, they bought stock shares. Thus, over the course of several weeks, GameStop’s stock values began to skyrocket, allowing Reddit users to fill their pockets with profit while the ‘millionaire investors,’ as some users called them, suffered deep losses.

According to a few threads published under the subreddit, the amateur investors understood the implications of their actions on the wealthier investors who had short sold stocks but focused more on saving their nostalgic and beloved company than they were concerned for another’s loss of hundreds of thousands of dollars—especially since they themselves were earning a large sum.

Private investors, equity firms, and hedge funds, enraged by their losses and the platform’s ability to better dictate trends in the economy, are attempting to sue Reddit users for unlawful “market manipulation.” However, as far as we know, nothing illegal transpired over the past few weeks, and any attempt to disprove this will be futile.

If there is one thing that 2021 continues to prove, it is that media can do anything. It can spread misinformation or awareness, cause insurrections or movements, dictate trends, or manipulate the economy. Everything that you say and do online does have an impact, and everything that you consume can be consequential. Whatever you post can create a ripple effect, causing a national movement, changes to the economy, or other significant short and long-term effects.