Shorting GameStop stocks gained further momentum with the public health crisis of the COVID-19 pandemic. In 2014, hedge funds and institutional investors began betting against GameStop, a brick-and-mortar chain that sells video games and game consoles as the gaming industry shifted to online streaming and mobile.
Prior to this, the subreddit had been growing steadily from a base of fewer than 2,000 subscribers in 2013.
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4īy January 29, 2021, as the campaign was in full swing, r/WallStreetBets had more than 6 million members. The meteoric rise of r/WallStreetBets to the mainstream consciousness can be traced to the GameStop short squeeze in January of 2021. It has created a subculture where redditors gather to share investment strategies with humor and online debauchery. He noted “the forums that existed were too serious, so I set up a place that was more lighthearted, that was OK with losing money.” Like any other subreddits, r/WallStreetBets has its own set of rules and moderators while users are able to post videos, memes, screenshots, and text-based discussions. The subreddit was started on Januby an individual investor named Jaime Rogozinski, who wanted “to fill a void for high-risk high-return trades.” 3 Read more and investment advice, the community self-describes as “4chan found a Bloomberg Terminal.” 2 Outfitted withĪny media (image, catchphrase, etc.) that is reposted widely, often with new iterations and in jest On Reddit, the online community r/WallStreetBets is a space where novice and experienced day traders can openly and pseudonymously discuss investment strategies of stocks and option trading, and share analysis gleaned from financial press or public directories. The following case study details the growth in momentum of the campaign on Reddit, both in coordinating market actions on GameStop and related shares, and in spreading broader sentiments to challenge institutional investors, and the response from public figures, institutional investors and regulators, before arriving at an assessment of the environment following the frenzy. The GameStop short squeeze is an example of coordinated financial market manipulation by individual investors through an online platform. Nevertheless, given the visibility of influential posts on the subreddit, reinforced by the site’s upvote feature, and its relatively independent moderation, Reddit remained a natural home for the campaign. Communications spread to other platforms, such as Discord and Facebook for more closed discussions between individual investors, and to Twitter, Instagram, YouTube, and the press for commentary and reactions from public figures and the institutional response. The forum r/WallStreetBets was central not only to the origins of this campaign, but also to its continued momentum through January and February 2021. protest movement following the Financial Crisis of 2007-08 in the United States. Though a principal goal of these individual investors was to financially gain from this effort, there was also a vocal desire to undermine the financial establishment and exploit the inconsistent regulatory enforcement of the industry, echoing the sentiments of the decentralized Occupy Wall St. In other words, institutional investors were betting against GameStop’s success the individuals of r/WallStreetBets worked together to prove that bet wrong by driving GameStop’s stock price up. “Shorting” is an investment strategy that assumes the stock in question will decrease in value. Read more to collectively buy and hold shares of the stock with the goal of forcing institutional investors shorting GameStop to buy it back at a higher price or take losses. Individual investors on the stock-trading-focused subreddit r/WallStreetBets mobilized as aĪ transient coalition of disparate political subcultures to work together for a common goal
This was an unprecedented situation, as the dramatic rise in price was the result of the collective efforts of an online community to game financial algorithms. From January 4 to January 27, 2021, the share price of GameStop (GME) rose from $17.25 to a high of $347.51.
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