NECC Observer

The student news website of Northern Essex Community College, Haverhill and Lawrence, Mass.

GameStop vs Wall Street

The video game retailer GameStop has been on a downward trend due in recent years to its poor sales horrible management and COVID-19 nearly tanking and bankrupting the company. This company would become part of one of the biggest stories that affected the pockets of Wall Street Bankers and Tycoons and it would last for multiple days. These crucial days were seen as a new type of fight between the Wall Street vs Main Street with surprising allies.

On Jan. 25 a Reddit forum called r/WallStreetBets and a user whose real name is Keith Gill gaind attention.  Gill is a 34 year old from Brockton, Massachusetts with a profession as a financial analyst. Gill also runs a YouTube channel called “RoaringKitty.” On his channel Gill posted a video titled “The Big Short Squeeze from $5 to $50? Could GameStop (GME) Explode Higher Value Investing.” In the video he said the following “It’s one of the most compelling opportunities asymmetric opportunities in the market today…. That is why it’s the top position in my portfolio.” The people on the forum started talking about on how to do a Short Squeeze.  A Short Squeeze is a massive increase in value of stock and it happens when no one is buying and there is too much demand for it, basically it’s a system anomaly.

They started to up the value of GameStop by over a thousand percent. These people were up against the major hedge-fund companies like Melvin Capital and Citron Research who were betting their own money against them. They shorted the stock of GME and every other company saw this did the exact same thing. The companies who shorten stocks are throwing away stocks that they see as worthless or made next to no money. These were the companies that were featured in the 2015 film “The Big Short” starring Christian Bale in where he plays Michael Murray. Murray was one of the key people who was involved with the 2008 Housing Crisis.

The Reddit traders used an app called RobinHood which sold people stock as it if were free money. GameStop’s stock started to grow since Jan. 12 when it reached its climax on the 21st when the market closed with astonishing value of $43 dollars which was more than double than the day before. The hedge-fund companies were not having it at all. Some went out of their way to express their anger on what everyday people were doing to them. One of the people involved with these companies was Andrew Left who is a Short Seller that worked with Citron Research. He posted a since deleted video on Citron’s Youtube page telling them “You are not going to change the story” and “You won’t see a squeeze here on in.” Others however were making fun of the people on Wall Street and encouraging the Redditor’s to continue the fight. One of these supporters was the Wolf of Wall Street himself, Jordan Belfort. Belfort re-enacted his famous speech from Martin Scorsese’s 2013 film “The Wolf of Wall Street.”

There were also every day people like Northern Essex Community College student Finn Sparrow who said “I think it’s a great movement and that these hedge fund managers like shady tactics until it’s used against them.”

Someone even managed to put up an electronic billboard that said “Money Go Brrr” in New York City’s Time Square.

Memelord, Millionaire Playboy and CEO of Tesla, Elon Musk, saw this and got into it with him tweeting out “GAMESTONKS!” The media got on to the GameStop train with some people either defending the people on Reddit like the co-host of the Halftime Report, Jim Cramer on a Jan. 27 broadcast who said it was “a First Amendment issue.” Cramer days later said “At the end of the day I don’t think a Reddit forum can bring the house down. They are picking undervalue stock that are a Big Short Position and run with them. It can cause crazy moves in handful of stocks but it’s not big enough to move the entire market.”

This affected other stocks like AMC and GameStop was only getting bigger with the market opening on $88 dollars with the closing the day before being at $78 and at the end day GameStop closed with $148 per share.

People were trying to find any explanation on what is going on with the short squeeze and suffice to say they were panicking. On Jan. 27 the stock of AMC along with GameStock went up and it opened at $300 around the same time Melvin Capital were trying to say a float. They were hemorrhaging money which resulted in them closing everything and this turned out to be false. As for Citron Research, Andrew Left, posted another video which was an update to the deleted video. In the video Left stated the following “The reason I’m doing this video it’s because I can’t answer one more phone call.”

As the day went on it got crazier with GME peaking at $380 before it went into free fall. This happened when apps like RobinHood crashed partly because everyone was selling at the exact same time which caused the sever to overload.

However there were others who came out to defend the side of Wall Street like late night comedian and TV personality, Jimmy Kimmel, who quote retweet to a tweet made by former host of the Daily Show, Jon Stewart. Stewart tweeted out on Jan. 28  “…The Redditors aren’t cheating; they’re joining a party Wall Street insiders have been enjoying for years.” Kimmel replied with the following “RealDonaldTrump? Is this you?”

He went so far as to doubled down on his showing later that night saying it was “Russian Disruptors.”  The news corporations also defended Wall Street by using disinformation and smear tactics like CNBC and CNN who put out headlines saying that Redditors are moving onto silver but on the Reddit itself however they were telling everyone not to buy silver. Newsweek went so far to call the Redditors involved in the event as “Far Right Extremists.”

In the aftermath RobinHood had to restrict the trading of GME people saw this and were furious about it with most wanting a federal investigation into what happened. The White House put out a statement to the press corps saying “they were monitoring the situation.” Some took their anger and frustration to Twitter with people like Rep. Alexandria Occasio Cortez who tweeted out “This is unacceptable. We now need to know more about @Robinhood’s decision to block retail investors from purchasing stock while hedge funds are freely able to trade the stock as they see fit. As a member of the Financial Service CMTE, I’d support a hearing if necessary.” Others all across the political spectrum condemned what RobinHood did.

The reaction to the entire event was both meme worthy and glorious mainly because it exposed the corruption of these hedge fund managers.

Jeremy Isabelle, another student at  Northern Essex Community College said “honestly, more power to r/WallStreetBets. Their main targets seem to be the people who have dominated the field since its conception….I would say that creating regulation to halt instances like this also discourages the average day trader from getting involved in the market to begin with. There’s no real possible way to prove that all of these traders were colluding together other than a Reddit thread exposing what the hedge funds were doing with the GameStop stock, which exposed the tremendous profit to be made for these traders.”

Overall the event itself showed Wall Street is not safe from the wrath of the everyday working class people. Congress as of now are currently investigating on what happened with hearings into the event itself. One of the key people brought into testify was Keith Gill, the man who started the whole trend. There is speculation on what happens next and raising questions like “is this going to happen again?” The answers ranged from “yes” to “no.” That answer came on Feb. 24 when GameStop’s stock jumped up again before that was halted multiple times before it closed with $91. On Feb. 25 it continued to surge with the stock doubling its value from the day before with $170. Only time will tell what happens next with the never ending battle between the common man and the brokers.