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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.

Catch up quick: The run on troubled stocks with vintage appeal — first GameStop, then other 2000s mall staples like AMC, Nokia and BlackBerry — began with one man.

  • Roaring Kitty, as he's known on YouTube and Twitter, has been talking up GameStop stock since taking a long position in it a year ago, when he noticed it was among the most heavily shorted stocks on the market.
  • On Reddit, where he posts as u/DeepFuckingValue, he's spent months posting about it to the r/WallStreetBets subreddit, a forum of several million amateur investors and spectators who mostly ridiculed his bullish-on-GameStop posts until recently.
  • The roughly $754,000 he ultimately put into GameStop is now worth tens of millions of dollars.

The WallStreetBets community has remained at the center of everything that's happened since.

  • The most devoted investors hang out on the Reddit WSB homebase and Discord, where the main WSB server was shut down for allowing hate speech after getting spammed with racial slurs. (It has since resurfaced.)
  • On major platforms like Twitter and YouTube, the WSB ethos — in this case, a half-joking commitment to holding strong on GameStop and the other stocks to try to force them ever higher — has proven attractive. It has drawn in newbies as well as entire communities, like the staff and fandom at Barstool Sports.
  • Robinhood and other trading platforms have only burnished the anti-elite pull of the movement by throwing up roadblocks to freeze transactions involving the hot stocks.

The appeal is obvious. The WSB types have demonstrated that, by banding together, normies can flip the script on billionaires who were just waiting to cash in on failure and collapse.

  • That it's being done with stocks that are in inexorable sectoral decline is part of the fun. A massively inflated market cap won't save GameStop from the fact that most video game sales are now digital, or AMC from the theater business being on life support, or Nokia from having lost the smartphone wars years ago.
  • Keeping their prices up is instead a show of solidarity, a way to make the vultures tremble and, of course, a way to get rich, at least on paper, and at least until the party ends.
  • Money isn't real, the thinking goes. Wall Street has always known that, and now regular people are seeing it too.

Between the lines: Some commentators have described the investors as trolls; some have drawn a through-line between them and the Capitol rioters.

  • It's true that both groups viewed themselves as the good guys injecting anti-establishment online chatter into the real world and charging the gates to strike fear into the hearts of the elites.
  • But the insurrectionists were there to overturn an election and possibly kill lawmakers. The WSB types are operating within the law, turning the system against the people they view as abusing it.

What's next: At some point, the inflated prices, wildly decoupled from any underlying fundamentals, are bound to come crashing down.

  • But the excitement at having pulled this off at all could prove sustaining, driving the millions of Redditors and other retail investors into new schemes.
  • Or, if Wall Street, Silicon Valley or Washington take steps to keep it from happening again, the excitement could curdle into rage.

Go deeper

Stock market has worst week since October amid Reddit frenzy

Photo: Tiffany Hagler-Geard/Bloomberg via Getty Images

Wall Street had its worst week since October as day traders bid up stocks for GameStop, AMC and others that gained popularity on Reddit.

Details: The S&P 500 fell more than 1.9% on Friday. All of the major averages fell more than 3% this week.

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.

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.

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