What makes me happy on the internet is seeing unprecedented events unfold in real time. In these last few weeks or so, Wall street has been in a frenzy, as hedge fund investors and reddit stock traders go head to head in an intense battle. This can be seen as a modern day ‘THIS IS SPARTAA” event.
This trending topic on the internet has made me happy because it’s a real life example that there is strength in numbers. Retail traders, which are everyday regular people who trade in the stock market, teamed up with each other against large hedge funds and banks. On a regular basis, retail traders don’t have much power. Large hedge funds and banks have the most power, as they have enough market power to move markets.
Retail traders on reddit beat these wall street big shots by artificially driving up the price of “meme stocks,” which are stocks that are living in their last days, but bring on moments of nostalgia. They are stocks whos sudden increase in value isn’t dependent on the company’s true value or actions of the company that contribute to its market performance. Meme stocks are instead, based on the basic market factors of supply and demand. A large volume of buy orders would drive up demand and thus price. Conversely, a large volume of sell orders will drive down demand and thus price. These stocks include GameStop and AMC. This fiasco all started when wall street investors shorted the stocks of GameStop and other companies destined to fail. Want to know what shorting stocks is? Take a wild guess first, then proceed
When you short a stock, it means that you bet against the stock. In other words, you bet that the value of the stock will go down to a certain price. Once the stock price falls at or below that set price, then you start to make some serious cash. This is basically what the big wall street guys were doing. However, if the stock prices go up, These big wall street guys lose money, since they basically lost the bet that the stock price was going down. That is exactly what happened here. The stock prices of these destined to fail “meme stocks” skyrocketed, causing catastrophic losses to hedge funds that shorted these stocks.
With this in mind, these retail investors on reddit banded together and started buying up GameStop shares like crazy, driving up the price per share from $16 to a peak of $345 a share in less than 2 weeks. Essentially, within a week GameStop went from a company living its final days in its stock market death bed to a full blown stock market athlete competing with fortune 500 companies. Please refer to the image below for a quick LOL moment.
This is the first time in history this has ever been done and it was only possible because of the internet. Think you’re having a bad day? Imagine being a wall street investor who spent countless hours analyzing charts and market performances to predict what companies can potentially be shorted, just to be outsmarted by some Adderall fueled millennials on reddit trading from their parents basements. Sheesh.
This goes to show how the internet can be used to bring people together for a multitude of different purposes. Yes, this includes teaching wall street billionaires a lesson and making some money in the process. If you want more information on this situation feel free to watch the Youtube video below.