The run-up in GameStop was so dramatic that short-seller Citron Research, which bet on the stock to drop, was forced to close out most of its position “at a loss of 100%,” according to managing partner Andrew Left.
Let’s get deep
There’s a
general feeling that the GameStop saga speaks to something larger about
the nature of financial markets, and even our culture. To try to make
sense of it all, we’ve distilled some of the most popular theories
that...try to make sense of it all.
1. The “stick it to the man” theory: This
theory suggests that these traders are motivated primarily by their
disdain for “suits,” the longtime wardens of Wall Street, who, Redditors
argue, exploited the little guy to get filthy rich.
- As Bloomberg’s John Authers writes,
“The people investing today are driven by righteous anger, about
generational injustice, about what they see as the corruption and
unfairness of the way banks were bailed out in 2008 without having to
pay legal penalties later, and about lacerating poverty and
inequality.”
2. The “everyone’s super bored” theory: Without
much else to do during the pandemic, people have turned to the stock
market as a form of entertainment...and to make a lot of money. Last
summer, individual investors accounted for roughly 20% of stock market activity on average, up from 10% in 2019.
3. The “Robinhood” theory: The
rise of the amateur investor can be traced back to Robinhood, the app
that pioneered no-fee trading and empowered individuals to influence the
stock market like never before.
4. The “memeification of society” theory: Some
observers have linked the behavior of Reddit’s trading army to other
online communities like 4chan that engage in “astroturfing” campaigns.
“If you can create enough hype around something, through memes,
conspiracy theories, and harassment campaigns, you can manifest it into
reality via capital,” Ryan Broderick writes.
Looking ahead...the
community behind these frenzied trades ran into some trouble last
night. Discord banned the r/WallStreetBets server for violating its
policies on hate speech, and moderators of the Reddit forum briefly made
it private.
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