By encouraging ordinary investors, also known as individual investors, to buy up GME shares and raise prices, hedge funds will have to sell out to reduce losses from shorting, which will drive the stock price higher.
“Hedge funds are getting hit hard by retail investors,” Linzon said.
Millennial investors have been sharing information through Reddit and social networks for years, but their sheer numbers mean they are now a force to be reckoned with, he said. pointed out that there is “It’s like a Velociraptor.” Jurassic Parkthey get smarter and eventually jump over fences,” he said.
The moment was also a chance for young investors to turn the old Wall Street upside down, who have flocked to invest since the pandemic was declared and the stock market has soared thanks in part to the help of free brokerage apps like Robinhood. . enterprise.
“I think you guys are making such an impact that these fat cats are worried they have to get up and work to make a living.” One of WSB’s subreddit moderators wrote in a Sunday post:. “That vague feeling you’re feeling is called RESPECT, and it’s been well earned. Wall Street doesn’t ignore your presence anymore.”
“We put FU back on fundamentals,” wrote one redditor on Tuesday In a post about millions of dollars Melvin is presumed to have lost due to the GME surge.
Their actions have a very real impact on those hedge funds. On Monday, the two companies announced they would invest more than $2 billion in Melvin, which it said was an “urgent inflow.” As the Wall Street Journal explained — Aimed at stabilizing the Fund.
But not all of WSB’s young investors have benefited from GameStop’s rise.
On Monday, David, a 25-year-old who works in corporate finance at a privately held tech company in the Bay Area and lives in the Midwest, was asked not to use his last name in the article, but then GME Bought shares for about $14,000. I read about it on WSB.
He said he had been following the chatter about GameStop for months, but finally decided to go along with it on Monday. “I thought the market was completely irrational and that everything I learned in college meant nothing,” he told BuzzFeed News.
He bought about $7,000 worth of shares priced at $115 on Monday morning. After watching his stock price rise, he bought another $7,000 for $155. However, it was the highest price of the stock for the day.
David panics when he realizes he could lose 15% of his entire portfolio. He sold all of his GME investments with a total loss of only about $600. He would have been down about $10,000 by the end of the day (although it would have been up by the end of Tuesday) had he not sold immediately after buying.
“Honestly, most of the bad deals on WSB are due to FOMO,” he told BuzzFeed News via Reddit. “I paid a big (but relatively small) price to learn that lesson.”
But for many on the WSB, the attitude is “eat the rich” and “get rich quick” (some redditors say investments have increased by millions) and trolls pay off. It is mixed with the self-righteous joy of playing. The investment and media world suddenly turned their attention to them.
“A good way to see how many hedge fund managers are in your building is to check the sidewalk outside.” A redditor posted on Tuesday. “It should be bloody.”
“Whoever dies with the GME will be welcomed in Valhalla by the All-Father Himself.” another person wrote.
Investors outside of the redditor see this moment as one in which young internet investors can make a big impact on Wall Street giants.
Reddit co-founder Alexis Ohanian believes this reflects a fundamental change. “2021: The mainstream will recognize that finance will revolutionize the Internet from the bottom up: Robinhood investors, Artz, cryptocurrencies, the list goes on…” he tweeted.
Tesla CEO Elon Musk has publicly battled an investor who has shorted the company and is himself a notorious troll. tweeted the link I wrote “Gamestonk!!” on the WSB subreddit on Tuesday afternoon.
Linzon said he expects hedge funds to be smarter about these moments. Even with millions of millennial investors, it’s not the whole market, the whole industry, or the giants like Apple that can really make a big impact, but rather the relatively small he is. Only one company, he believes.
But it’s also a reminder that the stock market relies on individuals, their emotions, and their actions.
“These are all just raw human emotions disguised as something deeper.” Peter Heilbronn writes: The founder of wealth management firm Trace Wealth Advisors said in a blog post on GameStop and Reddit. “Everybody wants to be invited to a party, but nobody wants to be left without a chair when the music stops playing. It creates instability.”
And that volatility exists until the game is stopped.
