Reddit wages war against Wall Street

Hannah Allen, Copy Editor

In an unprecedented financial move last week, the online Reddit community r/WallStreetBets insighted a 1,800% rise in the stock price of embattled gaming merchandise retailer, GameStop Corp. GameStop operates by primarily selling physical video game disks to customers. With the rise of digital transactions, the company has continuously seen its revenue decline. As such, institutional investors on Wall Street have been “shorting” the stock, or betting that it would go down. However, with the recent rally and new outlook of the company, this move has effectively cost billions for those who predicted the company’s eventual failure. Many who had never before shown interest in Wall Street have now found themselves diving into the depths of the stock market as GameStop shares continue to fluctuate with wild abandon. The stock pricing was only $17 at the beginning of the year but has since risen to an astounding $483 last week. 

While GameStop stock’s meteoric rise has gained national attention, the goals behind the movement are almost as convoluted as the movement itself. For some, the raising of the GameStop price was a deliberate and calculated rebellion against a system that they believe has mercilessly lorded over the masses. For others, it was a bandwagon move designed simply to make a little extra cash. Regardless of the motives behind this new wave of investment, one thing remains certain: it has shaken the financial world to its core.

Planning and discussion surrounding the rise in GameStop stock have been in the works for months, explained chemistry and chemical biology double-major and director of digital media for The Observer, Preston Willis. 

As a result of his father being a stockbroker, Willis developed an interest in the market from a young age. Due to his various positions, his portfolio has had an above-market return each year. “I would like to think it was me picking the right companies that were undervalued by the market,” commented Willis, “but luck is always a factor.”

Willis was one of the many individuals who had been following the Reddit threads––a move that led to his eventual decision to invest in GameStop. “I got interested in GameStop back in November when there were some rumblings about GME and some people made some outrageous bets on it … I was surprised by it because I assumed GameStop was on its last leg.”

Although he prides himself on his dedication to market fundamentals and long-term outlook, the third-year student freely admits to his miscalculation when it came to the early GameStop investments. “I will say, I got burned in GameStop’s case initially. I shorted it in the early days of the surge.” He continued, “It proceeded to go up and I lost 90% of my investment. I quickly loaded up on calls and bought into the GME hype train.”

After making back his initial investment and some extra, Willis eventually decided to sell his stock. However, he still maintains his view that individuals should decide for themselves when is the best time to close on an investment. “You always have to remember it is your money and only you can decide what to do with it. It is never wrong to lock in a profit. In the same token, it’s never wrong to lock in a loss to stop the cash bleed. Sure, it sucks because I would have made money hand over fist if I held, but it’s always better to have a confirmed amount of money than a volatile amount that can gain 50% or lose 50% in a day. It’s up to your risk tolerance.”

Unfortunately, it remains likely that even the most well-intended rebellion will eventually meet its end. Willis maintains that “90% of people are going to get burned by [their investment] once the hype dies down and the stock returns to normal.” Those who have been following the trends are already beginning to see evidence of this decline, as the stock’s price has fallen, closing at $53.50 a share on Thursday. Willis continued, explaining, “There is a big meme movement to have ‘diamond hands’ and to not sell, putting more pressure on the short hedge funds.” 

Willis is not alone in this expectation. In his article from Business Insider, tech reporter Tyler Sonnemaker reminds us that “analysts have speculated that this is a bubble and that share prices will eventually plummet, leaving those day traders stuck with massive losses, but the scale and speed at which day traders have been able to move share prices may signal we’re in uncharted territory.”

This development has caused a rift in what was, until recently, a fairly stable system. It seems likely that this newfound frenzy will continue to persist as legislators and business leaders argue over its moral and legal standing. While some argue that the stock market onslaught is nothing more than “market manipulation” or “a Ponzi scheme,” others see it as a way of allowing the average traders to gain prosperity in an otherwise restricted institution.

“What we are seeing is beautiful and incredibly scary at the same time,” commented Willis. “We are seeing the democratization of the financial system. Retail traders—you and I—now can interact in the same markets as the big banks. We can get the same 7% return the rich get instead of the 3% [inflation] that we get with wages.”

In retaliation to this mass grapple for stocks, some trading companies––most notably,  Robinhood, TD Ameritrade and Webull––have begun to restrict the amateur trades of GameStop, AMC and other stocks, while still allowing larger firms free range of the market. This move has only added weight to the claims that stocks are inherently designed to continuously inflate the wealthy. As Wall Street continues to grapple with the newfound possibilities, the rest of the world waits to see the eventual outcome of this financial clashing.