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Data: FactSet; Chart: Axios Visuals

A popular rebellion, organized by the powerless against the powerful. It might have failed in Washington, but it certainly seems to be working on Wall Street.

Driving the news: The market value of GameStop closed at more than $10 billion on Tuesday, on record volume of more than $26 billion.

  • The winners: A ragtag group of traders from Reddit and TikTok, led by a man calling himself “Roaring Kitty.”
  • The losers: Hedge-fund short-sellers wh0 are learning John Maynard Keynes's lesson the hard way — "The market can remain irrational longer than you can remain solvent."

How it works: Thanks to Robinhood and other stock-trading apps, trading options in GameStop (or BlackBerry, Bed Bath & Beyond or any other smallish company Wall Street traders have bet against) is easy, fun, and carries an irresistible commission of exactly $0.

  • Giant hedge funds like Melvin Capital now find themselves at the mercy of thousands of small investors using the internet to coordinate their buying attacks.

The bottom line: Short-selling — betting that a company's stock is going to fall — is a crucial element of efficient markets. But, thanks to Reddit, it has also never been more dangerous.

  • Wall Street veterans say the newbies' lack of experience and diversification mean they’ll eventually get crushed by their trades.
  • So far, however, the small guys are laughing all the way to the bank.

🎧 Axios Re:Cap podcast: Reddit is running Wall Street

Go deeper

Robinhood has a stacked policy team — and it's going to need it

Photo Illustration: Justin Sullivan/Getty Images

The stock-trading app Robinhood has an arsenal of political power brokers it can deploy on its behalf as it faces congressional inquiries over its role in an internet-fueled market manipulation frenzy.

Why it matters: The populist, discount trading platform is going to need that firepower because its decision to suspend trading of stock in GameStop and a number of other companies on Thursday has sparked criticism and promised inquiries from both sides of the aisle.

Jan 29, 2021 - Technology

How Reddit explains the GameStop saga

Illustration: Aïda Amer/Axios

Retail investors’ battle against short sellers who had bet against GameStop and AMC — and other heavily shorted stocks with depressed share prices — offers a window into what happens when Reddit culture spills out into the real world.

The big picture: Reddit is a microcosm of mainstream internet culture, a massive clearinghouse for all sorts of interests that's populated mostly by young men with a vaguely anti-establishment bent. That's caused major trouble at times, but is now propelling a populist-progressive unity movement that's rattling Wall Street.

Felix Salmon, author of Capital
Jan 29, 2021 - Economy & Business

SEC says it will "closely review" restrictions on Reddit-fueled stocks

Photo: Olivier Douliery/AFP via Getty Images

The Securities and Exchange Commission on Friday warned Robinhood and other brokerages that it will "closely review" actions they took on Thursday that prevented investors from buying stock in GameStop and other popular Reddit-fueled stocks.

Why it matters: The move from Robinhood generated anger across the political spectrum and among small investors who wanted to participate in one of the most exciting stock-market trades of the moment.