“You Meet Insanity With Insanity”: The GameStop Redditors Who Upended Wall Street Are Doubling Down
Wall Street can seem like a citadel, so it is with unreserved glee that many have kept tabs on the GameStop saga this week. For once, the underdogs were getting flush—and even better, seemingly screwing over hedge funds in the process. On WallStreetBets, the Reddit forum where it all began, retail traders are rallying one another to stay aggressive and hold against downward pressure on the stock, whose value was sinking by Thursday afternoon. An I.T. worker in Atlanta who bought in on Monday after reading about GameStop on the forum said he watched the value of his position lose and then regain around $100,000 over the course of 24 hours, and he’s not abandoning his shares anytime soon.
“It does feel like a gang-up on Wall Street, which has suffered no repercussions from the pandemic,” the I.T. worker said. “Jobless claims, jobless claims, every week we see them going higher and higher, all the chaos with Brexit, all the stuff that’s happening. Like, we can’t go outside, but you guys are making a profit. What the fuck?” On WallStreetBets, it’s to no small amount of admiration that DeepFuckingValue, one of the first users to go bullish on GameStop, who has since been identified by the Daily Mail as 34-year-old financial adviser Keith Patrick Gill, continues to post his daily tally from staying long on the video game store chain. Midweek, that was almost $50 million (from a reported initial investment of some $53,000), but the next day, it had dived by more than $14 million.
What happened was this: A few hedge funds, reading what they thought was the writing on the wall, bet against GameStop by shorting its stock, predicting that a brick-and-mortar store had no future in the COVID-delineated online economy. So retail traders bought the stock in droves and pushed its value up, knowing that traders would eventually have to buy the stock back at the higher price in order to cover their positions, losing money in the process. GameStop isn’t the first short squeeze Wall Street has seen, but it’s one of the first that originated in the online forums where day traders using popular platforms like Robinhood have coalesced during the pandemic. Some major funds were caught in the squeeze, including Melvin Capital and Citron Research, and total losses from the short positions in U.S. companies were estimated to be more than $70 billion as of Thursday. Redditors rejoiced over Wall Street’s pain, and CNBC’s Jim Cramer said the masses ganging up against institutional money could be finance’s new paradigm. “There is definitely a level of nervousness here,” said a hedge fund manager named Westley, who asked not to have his last name published.