Won’t stop Gamestop: A journey through the Reddit-fueled stock phenomenon and what happens next

A story of online chat rooms causing chaos on Wall Street, your computer and now the halls Washington.

[Photo Credit: Photo on left is by ccPixs.com and photo on the right is by thenails (CC BY 2.0)]


By: David Lochead


Can’t stop. Won’t stop. Gamestop.

Phrases like this dominated the media landscape over the last week of January as Reddit users created a surge in the stock price of GameStop and a few other publicly traded stocks like Blackberry, Nokia and AMC.

With the United States federal government currently holding congressional hearings over the market madness of GameStop, the saga is still ongoing.

In the last two weeks of January GameStop’s stock price surged from $20 to over $400 and left hedge funds like Melvin Capital with $4.5 billion in losses, which is 53 percent of their assets. Much of that surge is thanks to Redditors on subreddits, the forums that populate Reddit, especially the subreddit called r/WallStreetBets (all subreddits start with ‘r/’).

The stock surge had brokerages like Robinhood suspiciously halting its users from buying GameStop stock, financial regulators declaring investigations, celebrity billionaires taking to social media and politicians demanding hearings.
As someone new to investing, I decided to join in on investing in GameStop for a day while the stock climbed. Doing so got me attached to one of the crazier stories of the new year.

With key figures in this story now testifying on the stock surge, I revisit how the story unfolded by focusing on the three most important days: Jan. 27-29, the Tuesday, Wednesday and Thursday of the last week of January.


r/WallStreetBets became increasingly popular during the pandemic.

What makes this subreddit different from your business page advice is that r/WallStreetBets works by users concentrating on a couple specific stocks to invest.

On daily discussion boards users present their case for why a stock is worth investing . Other users can comment on whether they agree. In the case of a popular enough post, users can come to a consensus on a specific stock and hype it up to the rest of the subreddit.

The subreddit is a mix of people who have expertise in finance and those who are new to investing.

But what differentiates r/WallStreetBets from your mid-2000s chat room is the phrases, emojis and memes.

‘To The Moon!’ and ‘Diamond Hands’ are some of the most popular phrases, with rocket ship and diamond emojis that follow. Stocks are jokingly called ‘stonks’, because why not.

And the memes. My god the memes. Memes of everything from The Matrix or the television series Narcos are used to celebrate the success of a stock that r/WallStreetBets champions. No wonder the stocks popular on this subreddit have been dubbed ‘Meme Stocks’.

But outside of hype and memes, r/WallStreetBets has a darker element. Although there may be some, these users are not generally a progressive bunch. Users often refer to themselves in slurs that deprecate the mentally handicapped and non-politically correct nicknames. The subreddit describes itself as 4chan meeting a Bloomberg Terminal. Considering how 4chan got infested with the far-right and hate speech, such a description is uncomfortable to say the least.

Overall, r/WallStreetBets has the energy of Wolf of Wall Street bankers on a subreddit.

Regardless of how entertaining or problematic the posting on the r/WallStreetBets can be, there was one certainty: the stocks pumped up on this subreddit were successful. Nearing the end of January, one stock in particular was getting feverish hype: GameStop.

Day One- Tuesday, January 27

GameStop had steadily risen from $20 a share to nearly $90 by the start of Tuesday. But on this day the momentum created in subreddits like r/WallStreetBets manifested. The stock exploded into the financial community and became an international story. As the stock rose in the morning Elon Musk, the richest man in the world at the time, showed his support for r/WallStreetBets. “Gamestonk!”, Musk tweeted, attaching a link to r/WallStreetBets.

Not much later venture capitalist Chamath Palihapitiya went to Twitter to ask what stock he should invest in and the founder of Reddit, Alexis Ohanian, responded by saying GameStop. Soon after Palihapitiya tweeted he bought $125,000 worth of GameStop stock at $115 a share.

By the time the market closed at 4pm GameStop’s stock was $145 a share.

‘To The Moon!’ and rocket ship emojis were splashed through r/WallStreetBets. Memes of celebration were being paraded.
Business media like CNBC and Bloomberg were flocking to ask how a subreddit shot up a stock so drastically.

r/WallStreetBets and GameStop had become an international story.

Day 2- Wednesday, January 27

The rest of the financial world jumped onto GameStop. Between the stock market’s close on Tuesday and open on Wednesday the GameStop jumped to over $360 a share. Traders who could buy stock when the stock market is closed (which is messed up by the way) piled their money into GameStop.

Most media stories on r/WallStreetBets were obsessing about how amateur investors, also called retail investors, could make such an impact on the stock market.

“It’s going to be the retail investor that gets screwed because they think this is how the game works!” Scott Wapner of CNBC says to Palihapitiya, arguing that GameStop stock will come down. These investors on Reddit will end up losing a lot of money.
Wapner had a point, GameStop’s stock was inevitably going to fall. It is not worth anywhere close to $345.

But what is missing in Wapner’s and the rest of business media’s coverage in the GameStop story is how finance subreddits can do a great job of communicating how the stock market works to people who are new to it.

There are users with financial experience that break down their analysis of why they think a certain stock is worth investing in and do so in a way that is easy to understand. Unlike in a business page, the posts sound personal and are not buried in financial terms. Is Reddit a perfect forum for financial forum? No, not at all. But the ability for effective communication, good or bad, on Reddit deserves acknowledgement.

Heading into Thursday, GameStop was able to remain above $300 a share.

Day 3- Thursday, January 28

After a couple days of euphoria, GameStop starts getting political. The stock starts the day on a record high, almost $400 a share.
But soon after, Robinhood, the popular American trading brokerage, stops allowing its users to buy Gamestop stock. Canadian brokerages like TD copy Robinhood’s actions.

Within hours the stock price plummets to $132 a share.

The posts with rocket emojis on r/WallStreetBets are gone. The subreddit is consumed with rage.

Turns out Melvin Capital and other prominent hedge funds have been shorting the GameStop stock. Shorting is when someone borrows a stock, sells that stock then buys that stock back before giving it back to the lender. The strategy is that the person borrowing the stock is betting its price will fall. By selling the borrowed stock, they intend to make a profit by buying the stock back at a lower price before giving it back to the lender. Essentially, it is betting a company will fail.

r/WallStreetBets goes from a subreddit with Wolf of Wall Street energy to a subreddit with The Big Short energy.

“Apparently it’s only ok when the 1% do it,” one redditor said, referencing how Redditors are being immediately punished for affecting the stock market while the financial elites started the housing crisis that caused the 2008 recession and only one person went to jail.

“Let the people trade!” another redditor posts on the subreddit, mimicking a tweet once sent by Robinhood.

“Crazy mannnnnn. We can’t let this slide at all,” another posted.

Within hours Robinhood is sued. Politicians start calling out the hypocrisy and demanding a hearing for brokerages actions.

“This is beyond absurd,” Congresswoman Rashida Tlaib tweets.

“@FSCDems (Financial Services Committee) need to have a hearing on Robinhood's market manipulation. They're blocking the ability to trade to protect Wall St. hedge funds, stealing millions of dollars from their users to protect people who've used the stock market as a casino for decades.”

That night, Congresswoman Alexandia Ocasio-Cortez gets on Twitch, the popular videogame streaming app, to speak about the day's actions.

“What was happening here with Robinhood and with these trades were that everyday people were starting to be able to identify and exploit vulnerabilities in the system that has traditionally been cordoned off,” Ocasio-Cortez says.

Palihapitiya, the aforementioned venture capitalist, even joins Ocasio-Cortez on Twitch to talk about the unfairness of Wall Street.
In a strange alliance, Redditors consumed in aggressive pursuit of money, cocky tech billionaires and progressive politicians were teaming up to challenge a financial system that is rigged so the rich attached to financial institutions can never fail.

The Fall Out

“HOLD!”. The most popular line on r/WallStreetBets through the first week of February.

Users on the subreddit were urging each other to hold their GameStop stock in the belief that hedge funds were still trying to drive down the price of the stock.

Brokerages like Robinhood allow for limited buying of the GameStop stock on Friday, Jan. 29, but that limit lasts for over a week. The stock rises back above $300 on Friday but gradually the share price starts plummeting.

Between the end of January to the middle of February most users on r/WallStreetBets were insistent on holding the stock because they believed it would rise again. Other users were holding out of spite against the hedge funds.

One Redditor posted about how the 2008 financial crisis ruined his family’s life, and how he was willing to risk everything to get back at the hedge funds on Wall Street.

There were several posts of international solidarity, with users from the United Kingdom, Germany, Japan and other countries announcing their commitment to holding GameStop stock.

Others were posting their losses to show how they were willing to hold.

“DOWN HALF A MILLION ON GME STILL HOLDING” one user posted on Feb. 3 with diamond and rocket ship emojis as they posted a screenshot of their losses.

Today, on Feb. 20, GameStop’s share price is near $40.

Many users on r/WallStreetBets have kept their sense of humour in the tough times that have followed. Instead of memes celebrating money gained, the subreddit is now full of memes where users are making fun of themselves for their losses.

One user posted a meme with the Titanic movie, and GameStop holders as the people on the sinking ship.

“Wallstreetbets, it’s been a privilege holding with you!” the user posted on top of the Titanic meme.

According to The Verge, the Securities and Exchange Commission, the United States federal agency in charge of regulating the stock market, is investigating whether users on r/WallStreetBets committed fraud.

News came out that Robinhood is relying on creditors to maintain their operation and suspicion among Redditors and billionaires like Musk arises that Robinhood is being paid by hedge funds, creating an unfair and rigged alliance in the stock market.

Progressive think tanks like Public Citizen use this story as an opportunity to show how much funding for social programs can be generated from taxing trades on the stock market.

“Antogonizing Wall Street may be fun. But it’s also good policy. A 0.1% tax on Wall Street trades would raise $777,000,000,000 over a decade. We should do it,” Public Citizen tweets.

Currently hearings about whether brokerages, hedge funds and Redditors participated in market manipulation are ongoing. (If you have a subscription, the New York Times has solid reporting on them)

Most of the focus by the United States Congress has been on Vlad Tenev, the CEO of Robinhood. Tenev apologized to customers for halting GameStop trading but then insisted his company did not do anything wrong.

The CEOs of Citadel and Melvin Capital, the hedge funds who lost the most by GameStop’s surge also testified. Kenneth Griffin is the CEO of Citadel while Gabe Plotkin is the founder and CIO of Melvin Capital.

All three of Tenev, Griffin and Plotkin have denied they colluded together to halt trading on GameStop.

Overall, the hearings have been an opportunity for Democratic congress members to eviscerate members of Wall Street’s elite. Democrats like Congresswoman Maxine Waters stated it is easier to win the lottery than access premium stocks like Google and Congresswoman Carolyn Maloney told Tenev Robinhood is making its own rules at the expense of their customers.

Democrat Congressmen Sean Kasten heartbreakingly brought up the example of 20-year old Alex Kearns, who committed suicide after he thought he was over $700,000 in debt through trading on Robinhood.

Predictably, Republicans threw softball questions and used the hearings as an opportunity to push for more market deregulation.

While these hearings are happening in the United States this saga is not wholly American. Canadian investors were allowed and did get involved in the GameStop craze. Our financial system may be more regulated than the United States, but the stock market and all of its ethical implications are the same here.

Not everyone who posts on r/WallStreetBets is likely to align with progressive policy. But what the last week of January has reinforced is that the vast majority of North America still hate how the financial elite continue to rig the system to benefit themselves.

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