GameStop: A year after the ‘War on Wall Street’ and the rise of ‘meme stocks’ | business news
They wanted to bring down Wall Street.
You were David taking on Goliath – amateur investors competing against the power of the financial system.
A year after GameStop phenomenon and interest in “meme stock” hasn’t waned.
“I call it ‘the events’ because so much happened this month,” said Jonah Tulis, producer and director of GameStop: Rise of the Players.
The documentary, which was released in US theaters this week, follows GameStop investors as their actions become international news.
“It was a moment. It was the beginning of a new era,” says the 31-year-old.
The saga began in January 2021 when TThe struggling video game retailer has seen its stock price surge.
Amateur or retail investors, communicated in particular on social media Redditand generated a surge of interest in the company.
They thought the market was undervaluing the bricks-and-mortar computer game store and pivoted around it, driving the stock’s price higher with their purchases.
“It was wild… they acted on instinct. At the time, it was impossible to assess what private investors could do,” says Tulis.
These investors also recognized that large hedge funds were “shorting” GameStop — betting against the rising value.
When the opposite happened and the value went up, they were dealt a heavy blow, lost billions of dollars – and the “war went on.” Wall Street“The narrative was born.
By mid-month, the company’s shares were up over 500% year-to-date, with many saying online Reddit group r/wallstreetbets was to blame.
“Overall, our subjects have made life-changing money – in the millions. And they weren’t rich people to begin with,” adds Tulis, who also directed the film Console Wars.
“The End of the Wild West”
Today, many on the Reddit thread r/wallstreetbets are optimistic that this wasn’t a one-off phenomenon.
The community of mostly well-informed hobby traders now has over 11.5 million followers.
There will “definitely be a big fireworks display in late January, early February,” one comment said.
“Only if you spread the word and make it a real event. Imagine what campaigns we can do to promote the anniversary,” says another.
Despite the ongoing hype, GameStop’s stock prices have been falling since the beginning of this year.
Other “meme stocks” like movie theater chain AMC Entertainment are also still being talked about, although the stock price has almost returned to its pre-hype norm.
Some users are pessimistic about the future.
“This is probably the end of the Wild West,” writes one.
There are “hard days ahead,” says another, alluding to this higher interest rates on the horizonwhich would dampen price gains.
“A few will make it big with meme stocks, but most will lose life savings,” warns one.
These are thoughts echoed by some experts.
For-profit investing “can be like a pyramid scheme where the first make a lot of money and the last are suckers and get burned,” says Dr. Jorge Guira, Associate Professor at the University of Reading.
He thinks Pandemic Lockdowns played a major role in the phenomenon.
“GameStop has performed well relative to the past, but is down 35% — more than the S&P 500, which is down 10% this year,” he adds.
“This seems to reflect that people are now living more settled lives, rather than acting out the ‘market hypothesis of boredom’ that people are expressing through these businesses.”
The day the “buy button” was turned off
On Jan. 28, 2021, trading app RobinHood temporarily restricted buying of some volatile stocks, including GameStop, sparking outrage.
Many felt this was unfair.
The company said it was forced to take steps to ensure it could meet its needs as a broker given the unprecedented trading volume.
“We want our customers never to be surprised by trade restrictions again,” it said in a statement this week.
RobinHood continues to make changes to its operations, doubling its customer support team and strengthening its compliance and risk infrastructure in response to the saga.
“The retail investor revolution has shown us that a new generation of investors want their voices to be heard,” she added.
“Our work has only just begun.”
Regulatory reform can come
The US Securities and Exchange Commission (SEC), a government agency created to prevent market manipulation, has proposed reforms as part of its investigation.
It could introduce stricter rules for hedge funds to improve transparency of their activities.
“We can definitely expect the SEC to do something,” said James Angel, professor of finance at Georgetown University’s McDonough Business School.
“Those who short sell say that more disclosure will make them public targets … and I think they’re right about that, but at some point there has to be the right level of disclosure.” At the moment we have too little. “
A new era of investing for ordinary people
On Reddit, “Armchair Investors” doubt Wall Street is afraid of them.
“The big buddies rule the market,” one warned, “and most retail people who play this game lose.”
Despite these feelings, there remains a loyal community of enthusiastic investors who support GameStop.
Tulis believes this is the start of a trend that will not go away.
“There’s something special about how people find companies they believe in – companies they connect with,” he says.
“When I think of AMC or GameStop, I automatically feel a sense of comfort.”
“Things have changed so much — you no longer have to call a broker to buy a stock.
“It’s so much more accessible and that’s going to allow a lot more people to invest with their hearts, for better or for worse.”
GameStop: Rise of the Players is expected to release internationally later this year.