GameStop’s boom reveals the power of indie community
Editor's note: Stock market figures were as of January 28 at 2:30 PM EST
Well, that escalated quickly.
GameStop’s stock is up 13x since the start of 2021 and its market cap at nearly $16.5 billion thanks to a coordinated push by Wall Street Bets, a crude yet powerful subreddit dedicated to upending Wall Street and hedge funds.
What happened: Small traders in Wall Street Bets organized a short squeeze on GameStop’s stock, which hedge funds wagered would continue to decline. A short squeeze occurs when a stock’s price jumps sharply higher, forcing traders who had bet that its price would fall to buy it to prevent even greater losses.
Some of the high-profile short sellers of GameStop — specifically Melvin Capital and Citron — closed out their position in GameStop to the delight of Wall Street Bets, which celebrated their downfall with memes and "shitposts."
The fallout: As GameStop’s value has grown, short-sellers have amassed losses of more than $5 billion in the stock, according to data from S3 Partners. Melvin Capital received a $2.75 billion bailout from Citadel and Point 72 to shore up its finances.
Wall Street Bets’ push upset traditional traders and hedge funds shorting the stock, while emboldening the retail investors to replicate the squeeze with AMC Entertainment and BlackBerry. On Thursday, the popular trading app Robinhood announced it would temporarily ban trading on GameStop, AMC, BlackBerry, Bed Bath & Beyond, and Nokia as the companies' stock has steadily rallied in recent weeks. A class-action suit against Robinhood has already been filed in the Southern District of New York.
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A populist movement: While the U.S. remains divided politically, the Redditors are being broadly hailed as working-class heroes for sticking it to Wall Street in a way that neither Trump nor Biden ever could. Reddit user DeepFuckingValue led the charge on the short squeeze. This indie time traveler managed to turn his $55,000 bet on GameStop into $47 million while also helping his peers rake in millions.
Financial pundits never saw it coming, but they should have. Chock full of irreverent memes and colorful language, the subreddit has a war-like mentality against hedge funds and believes that the stock market is a casino. Wall Street Bets’ 4.7 million self-described “degenerates” post each day their "YOLO" positions, vowing to either "get rich and ride away in a Maserati or end up living underneath a bridge."
Why it matters: GameStop’s vertical ascent is the latest reminder of how a community can dismantle the status quo. Indie hackers have steadily shifted attitudes of how individuals work, live, and create value in the marketplace. And the rise of micro-investors and groups like Wall Street Bets parallels the growth of solo entrepreneurs and their digital communities.
What’s to come: More people than ever are launching side projects, freelancing, and quitting their full-time jobs to pursue their entrepreneurial dreams. And as an increasing number of these independent workers see success, they'll find more ways to exert their influence on systems in which they've traditionally lacked power.
Underdog ethos: The millions of members of Wall Street Bets view their GameStop push as a battle of David vs. Goliath. The little guys took on huge hedge funds, exposing not only what they feel are hypocritical critiques but also a desire to buck traditions that have left small investors at a disadvantage.
That is a similar sentiment held by indie hackers that are aiming to challenge incumbents, topple conventional thinking of how to grow a business, and smash the status quo.
What are your thoughts on the GameStop kerfluffle? What’s your title for the movie that’s undoubted to be made about this? Please share your thoughts.
+1 to the rise of digital investment communities like WallStreetBets.
There's already at least 25 other Reddit subs specifically dedicated to co-trading based on common themes, risk profiles, industries and stocks, and there are bound to be many more launching in the near future.
etoro has been around for years, social trading and copying themes etc is literally built into the system.
Some important corrections need to be made on this post:
Don't pay too much attention to what you read online. Media and information is being manipulated and it's very hard to get the real picture if you rely on them.
Go see what is really going on at https://www.reddit.com/r/wallstreetbets/ .
Many of us love to stick it to the Goliaths and some big corrections are definitely needed in many areas of our lives. But I fear this is going to end in tears for a lot of people.
The small group who started this move have already exited and are sat on a beach somewhere, pretending to be revolutionaries, but come on lets face it, they knew exactly what was going to happen when the herds began following.
Sadly the herd continued to buy way past a sensible point, believing they were part of a great revolution (and in many ways they were) but not really understanding the underlying mechanics of what they were doing.
Unfortunately many will have been too late to the party and as a correction takes place they may see their investment nosedive. Indeed as of yesterday 28th Jan the price appears to be tanking.
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forgive me if I don't take that bet ;-) buts lets catchup again Monday...
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Fantastic exposition, thanks. While I can't relate to the enormous risks WSB traders take, I appreciate a good underdog story just as much as the next guy.
People got too excited and bought way too much, thinking they were part of a big movement (and they kinda were), but they didn't really understand how things work. Now, the price is crashing, and those who joined late might lose everything.
Lots of people jumped on this thing hoping to beat the big guys and make a change through playing games like apkvogue, which is awesome! But it's starting to look bad for many. The few people who started it all got out early and are probably chilling somewhere, while the rest of us are left to deal with the mess .
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This is a great write up but definitely not an 'indie' movement. Indie hackers and people a like are very risk averse (MVPs, low/no investment, small improvements and so on). I think WSB, having been part of it for many years, cannot compare to indie hacking as the risk tolerance between this community and WSB is night and day.