A week ago today, in one of my group chats, someone joked about buying calls on GameStop stock.
Note: GameStop is aka GME because of its stock ticker, "NYSE:GME"
As we were exchanging those texts last Friday morning, January 22nd, GameStop was trading at about $45/share.
That’s 2x higher than it was a month prior. I was amazed by the fact that a small but mighty group of Redditors had moved the market in such a big way.
Turns out, this would be just the beginning.
About last night
On Wednesday, after a heads down day of Zoom calls and not checking Twitter, Keith (who hasn’t bought a stock in his life) says to me “I’m buying GameStop tomorrow”.
I immediately pull up my Apple Stocks app and see that, wow, GameStop had hit $483 per share — greater than 10x where it was less than a week ago.
An old school physical retail company going >10x in a week, and my finance-apathetic husband all of a sudden wanting to day trade?!
2021 sure is getting weird.
I’ll break this post into three parts:
“Plz summarize the news”
r/wallstreetbets 101
How did the GameStop mania happen?
Then, I’ll close off with where things go from here.
“Plz summarize the news”
In the past few days, the stock of a company called GameStop has absolutely freaking taken off.
It’s not unheard of for stocks to have crazy swings like this — they certainly can happen — but it’s the reason for GameStop’s increase that is newsworthy.
Usually, you can muster together at least *some* sort of company-related or market-related rationale for why a stock has made a big move — say, their quarterly earnings report came out and they did way better than expected, they announced a big partnership, etc. — but in this case, most of the movement has nothing to do with GameStop itself.
It’s been caused by one small but mighty Reddit community: r/wallstreetbets
r/wallstreetbets 101
TL;DR:
Over the past five years, a Reddit community has emerged of low-brow, un-finance-y teenagers — yes, I’m generalizing wildly — who started treating the stock market like a casino. And making memes.
If you want the full history, this 18-min video gives a rundown.
But honestly, the quickest way to get a feel for the community is just go to r/wallstreetbets and peruse a couple of the threads.
You’ll quickly learn terms like “diamond hands” 💎👐, “TO THE MOON” 🚀🚀🚀, and “tendies” 💰.
This community full-on has its own vocab, and it’s incredible.
WSBers primarily use an app called Robinhood, which offers free trading & a sleek user interface, and kind of game-ifies investing.
In a way, it’s refreshing and hilarious how un-seriously the WSBers approach finance — they make trading *fun*.
But in another way, it’s a little terrifying. You’ve got people “investing” money they don’t have, making high-risk options trades they don’t quite understand, and blindly following a herd of chaos.
How did the GameStop mania happen?
r/wallstreetbets is all about following the herd.
The herd, in this case, is led by u/DeepFuckingValue (u/ means “user” in Reddit shorthand).
In July 2020, u/DeepFuckingValue posted a 56-min YouTube video containing an extremely well-thought out thesis around GameStop as a company.
Interestingly, this thesis isn’t getting much press at all. I think it’s a phenomenally cool untold story.
u/DeepFuckingValue had high conviction that this fledgling retailer had a shot at turning things around — and a very strong articulation as to why.
You have to like this guy. He’s engaging, well-read, and invites criticism of his ideas. He’s drinking a beer as he walks you through his thinking.
I want to be friends with him.
If you pull up his Reddit page, you can see that his interest in GameStop goes even further back than this — this dude was on this way back in 2019.
So, the GameStop story isn’t a new 2021 thing that just sprung up in the last couple weeks.
This all started with a smart, well-intentioned guy with a high-conviction thesis — who was then followed by an army.
The army was fuelled by two main ideas:
“Get rich quick” 🤑
Like most of r/wsb, it’s about going big and making a pretty penny — and fast.As GameStop started to gain momentum, more and more WSBers saw this as a way to make a quick buck.
Note: they’re now doing this with other stocks too, to a lesser degree — like BlackBerry (BB), AMC, and now even cryprocurrency Dogecoin — but GameStop is by far the most talked-about.
It’s casino-like, it’s risky as can be, and they are *here* for it.“Eat the rich” 👆
While bringing down the establishment hasn’t always been the main overarching theme on r/wsb, it seems to have become louder recently — and this GME event has taken it to the next level.But, how does this actually stick it to the rich?
Well, a few big hedge funds had short-sold GME. This means they were betting big sums of money that the stock’s price would go down.
The WSBers realized something: if, together, they *made* the price go up (and, as a result, a short squeeze happened), these rich fools would lose big on this deal.
And lose big, they did.
Where does this go from here?
Since the all-time high was hit on Wednesday, some crazy stuff has happened:
Robinhood restricted GameStop trading (and many other brokerages did, too)
This is front-page-top-story-on-BBC-World-news level now.
Honestly, I don’t have a hot take on what happens next. 🔥
This has spurred so much discussion, reading, listening, and thinking in the past 48 hours that I’m simultaneously exhilarated and exhausted.
GameStop may well go up into quadruple digits, and it may well crash to zero today. Not here to speculate.
What I will say is that I’m excited for the conversations this is spurring about our (definitely flawed) financial system, democratization of investing, and the power of social media to ignite change.
I’ll write more about implications another day.
In the meantime, that’s all, folks.
If you’re following this as obsessively as I am — or are just starting to learn about it and want to chat — you know where to find me.
✌