Wednesday was a banner day for the little guy on Wall Street – the rebel, the brawler, the one who will not be put down by those in power. If you love David vs Goliath stories, this gem will make you smile.
A number of institutional investors and hedge funds had spent billions “shorting” GameStop’s stock, due to the company’s struggles to survive as the “Blockbuster of video games.” In the simplest possible terms, shorting a stock means betting that the price will go down. GameStop is the 12th-largest U.S. equity short on the market at time of publication, according to Investopedia.
GameStop’s stock price collapsed by 62% Thursday, resulting in trading freezes. BlackBerry followed suit, collapsing 44%, AMC Entertainment was down 67% and Nokia fell 30%, according to The Hill. The Dow Jones Industrial Average bounced back by more than 500 points before noon after heavy losses Wednesday.
When someone shorts a stock, they have to borrow the shares from an entity like an investment bank. They then sell those shares at the current price, and buy them back at a later date to return to the lender. That second part of the process is known as “covering.” If the price goes down during the time between those two transactions, the short seller will profit the difference. If the price goes up, though, the short seller loses when they finally have to “cover” and buy back their shares.
In a nutshell, a small Reddit group of independent investors in a subreddit group named “Wallstreetbets” put the screws to the the big hedge fund managers that have done the same to many smaller traded companies. It was glorious!
So who are Wallstreetbets? Essentially, they are the financial version of those that stormed the Capitol a few weeks ago, but in this case, EVERYTHING THEY DID WAS LEGAL. The same way Pelosi, Schumer, and the rest of the Dem Jackass Hee Haw gang were terrified by the patriots display of angst, frustration, and DC greed, the Wall Street fat cats who have no trouble crushing their competitors were properly embarrassed both socially and financially by these renegades and believers in TRUE free market capitalism.
Entrepreneur Jaime Rogozinski, founded the forum in 2012 in hopes of building a place where sophisticated investors could discuss high-risk, high-reward short-term trading strategies, Money reported in 2018. “All the talk was about long-term investing and index funds,” Rogozinski told Money at the time. “Whenever I would go on Reddit and post a comment or question, I would get berated for not being a good investor.” Nearly a decade after Rogozinski founded the subreddit, it has amassed more than 3 million subscribers, or “degenerates,” as they call themselves. The demographics of subscribers is hard to know, but it appears to be a predominantly young, male crowd.
As Reddit user “Flexinzack” put it: “For all the big f*cking hedge funds monitoring us, this is a message from us to you, we f*cking own you now. F*ck. You.”
If you’re a long-term investor who buys stocks and holds on to them for years, these Redditors may seem closer to gamblers. And if they’re trading what they say they are, they’re gambling thousands of dollars. The risky and speculative options trading WallStreetBets members claim to participate in has become much easier to do recently thanks to apps like Robinhood. And since many are staying and working from home during the pandemic, day trading has become even more popular.
Now for the really sketchy part of the story.
Robinhood is a financial services company who have advertised themselves as the champion of the little investor, and whose mission is to “democratize finance for all” by offering commission-free trading on individual companies, options, ETFs, and also offers cash management accounts and cryptocurrency trading. But Robinhood showed their true colors and demonstrated just who are pulling their strings. Robinhood single handedly rewrote the rules for Wall Street and stopped all selling of Gamestop shares once they saw what was happening. In 2021, Robinhood steals from the poor and gives to the rich.
After reading 30+ articles about what happened Wednesday, this video from Tucker Carlson’s show explained it the best. It’s 21 minutes long, but well worth the investment of time. Give this at least 3 minutes. You’ll thank me.