Many of today’s adults spent their youths in GameStop stores. They bought and sold consoles and games. They lined up for launches. Now some of those people have become rich and encouraging their friends on Reddit to . GameStop’s shares rocketed higher than ever expected in the past couple weeks, and all because activity between social media investors began pushing it up. Wall Street had bet heavily that the company would fail, but as the price kept going up, investors were forced to reset their wagers. That led the stock to rocket up, and then swing wildly.
Jaime Rogozinski, the apparent founder of the Reddit community at the heart of all this, told The Wall Street Journal it’s like “a train wreck happening in real time.” Keith Gill, the trader in the Reddit community who helped kick off the battle, told the paper he “didn’t expect this.”
On Thursday alone, GameStop’s stock hit all-time highs of $492.02 per share, only to drop by more than half a minute later. It closed trading on Friday at $325.
GameStop itself hasn’t fundamentally changed in the past month. It’s still a struggling retailer facing an uncertain future against the rising tide of online shopping. But its stock has shot up as much as 1,800% — that’s not a typo — since the beginning of the year. This dynamic’s led Wall Street investors who bet against the company’s future to lose billions of dollars, and the excitement is .
Over the past week, the financial world watched in shock as GameStop stock rose to unthinkable levels. Even Elon Musk tweeted about it, pointing his 43 million followers to a link of the Reddit community investing in GameStop, called r/WallStreetBets.
By the close of regular trading Wednesday afternoon, the stock was $347.51 per share, up from from historic lows of around $3.30 per share in the summer of 2019. And then in after-hours trading, it dropped by more than 37%, only to rise again. Thursday saw even more dramatic moves, with the stock jumping up to $492.02 before dropping nearly 60% to close at $197.44. Then, in after-hours trading, it rose back up to $311.99.
Meanwhile, stock market trading apps appeared to eitherfor at least part of the day.
The popular stock trading app Robinhood drew particular attention for what saying it “gamified” stock trading to a potentially dangerous degree. Now it’s being accused of outright market manipulation, including through at least one class action lawsuit filed already. Robinhood, for its part, said Friday that market rules effectively forced it to put those restrictions in place.. People had been raising concerns about Robinhood for a while,
“We’re seeing a phenomenon that I have never seen,” Jim Cramer, a Wall Street commentator on CNBC and a former hedge fund manager, said during a segment Monday. And GameStop could be just the start. “It’s insane.”
This may seem like an oddball story about Wall Street investors being overrun by excited social media users. For some, it’s been fun to watch those investors get taken to the cleaners by a bunch of people posting rocket emojis, saying GameStop shares will go “to the moon.”
But for some on Wall Street, it’s the latest sign of how social media can upend everyday life. Twitter has changed the worlds of news and politics. YouTube and Instagram have transformed the fashion, beauty and entertainment industries. Now Reddit is taking on Wall Street.
These worlds have overlapped as well. Fans of Korean pop groups, known as K-pop stans, post floods of tweets about their favorite stars to overwhelm racist hashtags on Twitter. And TikTokers banded together in attempts to confuse President Donald Trump’s reelection campaign.
Now emboldened Reddit communities are talking about taking on other companies that Wall Street is broadly betting against. The Reddit crowd is already attempting to push up BlackBerry, the once-popular handset maker that now focuses primarily on selling business software. And Redditors are also targeting the struggling movie chain AMC, pushing its stock from hovering around $2 per share to more than $8 in after-hours trading. By Wednesday afternoon it closed at $19.90 per share before dropping to $12.75. On Thursday, it fell even further, to $8.63 per share.
The Reddit community’s actions have had such an impact that TD Ameritrade took the extraordinary step last week to it thinks are being manipulated by social media.on Game Stop and AMC stocks, “out of an abundance of caution amid unprecedented market conditions.” Nasdaq as well warned that it will halt trading on stocks
Meantime, traffic to the Reddit community at the center of the drama, r/WallStreetBets, is breaking records. r/WallStreetBets counted 73 million page views for its discussion boards on Tuesday, according to a report by Mashable. Over the past week, it hit about 700 million page views. Reddit is already the 46th most popular site on the web, notching more than 78 million unique visitors in December, according to comScore. And on Wednesday, the Reddit’s mobile app tallied its biggest single day of downloads, industry watcher Apptopia said.
But when the memes stop and the excitement goes away, GameStop will go back to being that struggling video game retailer at a time when gaming is increasingly moving toward streaming and the idea of stepping into a physical store is still a nerve-wracking prospect during a. At that point, stock analysts say, whoever’s left holding shares will see their value evaporate.
“This is unnatural, insane and dangerous,” Michael Burry, a prominent GameStop investor and one of the subjects of the book and movie Markets Insider reported., wrote in a now-deleted tweet. His roughly $17 million investment in the company has ballooned to $250 million as of Tuesday,
Michael Pachter, a longtime video game industry analyst at Wedbush Securities, said he hasn’t even bothered to update his stock price expectations for GameStop since shares started going crazy last week. “Who’s listening?” he said in an interview last week. “Nobody cares what a sell-side analyst says right now.”
To him, there are reasonable explanations why people could be somewhat excited about GameStop. One of its newest board members, Ryan Cohen, helped turn Chewy into one of the largest online pet product sellers in the world, before selling it to PetSmart. GameStop’s also on a track to being profitable again.
But that doesn’t come close to explaining GameStop’s share price now. “It’s a Ponzi scheme,” Pachter said, referring to a form of fraud that appears to make money but in fact is only propped up by funding from new investors. “There is a point where it’ll go down.”
He suspects that may happen after the company reports its quarterly results in March, at which point executives and investors on the board are allowed to sell their shares.
One thing analysts watching wonder is whether the Reddit investors will lose their millions whenever the stock eventually crashes back to earth. Rogozinski, the man who helped found the Reddit community, said their approach to investing as more like gambling than traditional analysis and strategy. Its members, who the community identifies as “degenerates,” often encourage one another to push all their funds into one stock, riding it up and down. Their posts are “hold the line” and “diamond hands” (hold onto your stocks for a long time) and YOLO (you only live once).
He told the WSJ he never imagined the Reddit community would morph from its beginnings to what it’s become. “It’s a little like watching one of those horror films where you can see the bad guy slowly going up the stairs,” Rogozinski said.
Indeed, even Keith Gill, the community member who helped kickstart the initial battle over GameStop, told the Journal he was surprised by what it’d turned into.
“I thought this trade would be successful,” he said, “but I never expected what happened over the past week.”
In the meantime, the social media hype is continuing on Reddit, where users are declaring their intention to buy and hold more GameStop shares, all to send prices even higher.
“My mom told me it’s time to sell,” one Reddit user wrote on a post about GameStop’s stock moves. “Should I find a new mom?”
“Yes,” another user answered. “The answer is yes.”