Editor’s note: Greg Behr is partner with Billy Warden in GBW Strategies, a Triangle-based marketing and strategy firm.
DURHAM – The video game store at the dying mall? Their stock is up to how much?!
Like many of you with an eye on the market, those questions have dominated both internal and external conversations this week as GameStop, the brick and mortar retailer of items you can very easily and quickly buy from your couch, saw their stock rise nearly 400% this week.
Did they create a new and exciting product line? Restructure to maximize profits? Are analysts overly bullish on their ability to overtake much larger retailers like Amazon and Target?
Nope.
GameStop’s rise from mediocrity came on the back of what seems to be…spite.
Greg Behr
The genesis of the surge started on Reddit, the brightest of the internet’s dark corners. Specifically, in the forum called “r/WallStreetBets,” where amateur traders share tips and ideas for beating the market.
For those who are not frequent users, Reddit is an online forum and social news aggregator founded in 2005 with hundreds of millions of active users. Content ranges from inflammatory gossip to hilarious memes to even crossover content in the case of the novelist who just inked a big movie deal after posting their multi-part novella on the platform.
Users judge the content and posts shared in the forums and threads and forums can go on for years amongst dedicated users.
But, like many forums on Reddit and elsewhere, the enthusiasm of thousands of these dedicated users can lead to all sorts of newsworthy and game-changing developments.
The GameStop movement
In this specific case, forum members saw a report that Wall Street investors were shorting the GameStop stock, essentially betting that the stock would go down with the goal of eeking out a profit in the process.
Inside the WallStreetBets-Reddit phenomenon: Stock market meets internet fringe culture
Well, the Redditors didn’t like that very much and have thus driven up the value of the stock considerably to inflict pain on those Wall Street investors. Even more interestingly, many are treating the initiative as a game trying to see just how high they can push the stock.
That’s the technical stuff that I’m sure could be explained better by someone much smarter than me.
Growing populism
As a larger movement, this exercise should not come as a surprise as it represents a growing populism taking over many aspects of our society.
Where once there were gatekeepers and hierarchies to organize communities, there are now limitless opportunities for masses of loosely organized individuals to take on Wall Street or Storm Congress, or collectively cancel people.
Community forum tools like Reddit help a small sentiment grow exponentially. In this case, consumer tools like the zero fee trading platform Robinhood remove the barrier of entry to get involved and make a difference—whether good or bad.
With the outcome uncertain for GameStop and not knowing where the r/WallStreetBets folks look next, it is both exciting and a bit scary to watch it all unfold. Yes, it is refreshing to see Wall Street Goliaths get a bit of their comeuppance when attempting to short companies. Even the forum’s founder, Jaime Rogozinski, recently told CNN, “ I predicted the trajectory where things were going, but by no means did I predict the timing or the magnitude.”
What’s likely is the initiative will lead to some people making a lot of money while others will crash and burn. Alan Greenspan described “irrational exuberance” in the 90s to explain the irrational investment in companies that were not fundamentally sound and called the Internet bubble. GameStop is not fundamentally sound.
People will get hurt, and it likely won’t just be the Wall Street bankers with money to spare. Perhaps, there will be a correction to a stock market system dominated by big players who seldom have the greater good in mind.
Either way, forums like Reddit will continue to grow in popularity as they offer niche user-focused opportunities in contrast to the broad, generalized mainstream media.
Get used to the term “It started on Reddit” creeping more and more into your morning news and conversations.
Reddit driven, GameStop stock keeps soaring – where does mania end?
