Reddit Made History With GameStop (Why It May Still Hit $1000)
A group of online anarchists just broke Wall St. for the foreseeable future
We are witnessing the French Revolution of the financial world. A group of anarchist Reddit retail investors has challenged some of the wealthiest people in the world.
These Reddit day traders, who are often considered unsophisticated by the Wall Street elite, pounced on that assumption and trolled a lot of important people out of billions.
We are now living in a meme; one where near-bankrupt retailer Gamestop’s stock has soared in historic volatile fashion.
The aftermath: GameStop stock jumped more than 822%, from $17.25 at the beginning of the year to a high of $159.18 on Monday. Then it dropped by nearly half, only to rise back up to $147.98 on Tuesday. It ended today at $313.54.
Ok, so what happened? And what happens next?
How Reddit Pulled Off a Miracle
There’s a way to make money on a company you think will go bankrupt — it’s called short-selling.
Short-selling is a risky practice that involves borrowing a company’s shares for free to sell them at a high price (ideally). You can then buy the stocks back at a lower price and return them to the company.
Many Wall Street fortunes were made this way.
However, if the price keeps surging because people are buying or, in this case, a manic internet community is drumming up hype, the investor cannot return those stocks at a lower price point. Instead, they lose a shit load of money. And in the case of this Gamestop situation, more than $5 billion lost among short-sellers.
Right now, however, more people are still betting against GameStop than betting it will succeed. “Short interest is 71.2 million shares, while GameStop has only 69.7 million shares outstanding,” Matt Levine of Bloomberg points out.
This is going to play out badly for someone out there. We just don’t know who yet.
This is When Things Got Crazy
The subreddit “Wall Street Bets” considers this a war on Wall Street elites. Many WSB users allege they won’t sell off until GameStop’s price reaches $1000, or even $5000.
And it’s no secret that their community is a bit crazy…
I will not sell my GME 💿 I will not sell them on my lawn 🌱 I will not sell them to Citron 🍋 I will not sell them to my fren 🧑🤝🧑 I will not sell them to Melvin 🌈🐻 I will not sell REE REE REE REE 🐷 I WILL NOT SELL MY GME 🚀🚀🚀🚀🚀🚀 — MontageRyanxD
Anyways, even Elon Musk and Chamath Palihapitiya voiced their support towards Reddit’s actions.
We’re in a Tug of War Between Wall Street and Reddit
To the laymen, WSB looks like a dumpster fire. In actuality, it’s quite a wholesome community when you get past the crude language and salacious memes.
Many users make posts to thank the community for allowing them to make enough money for hospital expenses, student loans, or to become wealthy in a time when many of us are living paycheck to paycheck.
WSB aspires to be Robinhood — ironically enough since most of their users trade on the app — during these tumultuous times.
However, they’ve chosen to make an enemy of the richest people on the planet, and that group is not happy about all this. They’re fighting back. WSB was flooded with bots today and many users created accounts to spread misinformation about selling or investing in other stocks like AMC and BlackBerry instead of GME.
Furthermore, almost every online broker has crashed in recent days sparking arguments of conspiracy in the subreddit. Reddit itself is crashing frequently due to the insane amount of increased traffic.
The community even says that Wall Street lobbied media outlets like CNBC to spread fake news. That claim could be true — but who’s to say?
These next two days will be historic for GME and WSB. Earlier today the subreddit closed out its community to the general public and made it invite-only just to get a handle on all this insanity. This isn’t even to mention that the SEC can intervene and put an end to all of this.
We’re in the end game now — and I don’t think anyone knows how this will play out.
What’s My Position In All This?
I invested $8K in Gamestop this morning at $305. But that investment is a gut-punch as GME nosedives amid Discord removing WSB. In addition, the SEC making an announcement that they’re aware of the shenanigans going down.
I don’t know how any of this will play out, but I’m holding until the weekend…
However, I invested this money knowing full well I could lose every cent of it. That’s why I’m monitoring WSB and the market almost every minute of the day to see what’s going down (my work productivity is down tremendously).
Remember: This is not investment advice, but you should definitely pay attention to this history in the making. It will have an impact for years to come.
EDIT: They are back online baby!
EDIT 2: Wow, they’re really back online. Let's see how this all plays out.
