A lot of weird things happened during the pandemic. Do you remember when all those celebrities sang “Imagine” from their mansions to try to make everybody feel that we were in this together? Or people getting married on Zoom? One of the weirdest business stories of the pandemic had to do with GameStop. The company is an American chain of video game retail stores. Before last year, they were mocked constantly online for their outdated business model. Essentially, the company would sell and resell video games, and they were known for being especially stingy when it came to the prices they offered to buy back games. In a world where most people buy games on their consoles, these brick-and-mortar stores have long seemed like relics from the Blockbuster era.
To the Moon
But where there is a will, there is a way. The company was valued at a lowly 3.25 USD per share in 2020, but it saw its price rocket up 8,000 per cent in less than six months. At its peak, the company was valued at 469.42 USD per share, and it is all because retail investors on Reddit’s r/wallstreetbets forum took a liking to GameStop, mostly because it was the most heavily shorted stock on Wall Street. GameStop’s path laid the foundation for how meme stocks have been treated since. Wallstreetbets users focus on companies that either have a small number of shares outstanding, which makes it easier to move the price, or struggling businesses that traditional investors (mainly hedge funds) have bet against. They meet and discuss mostly on Reddit, and traders attempt to push stock prices higher and higher, punishing those who bet against the company. In GameStop’s case, a lot of hedge funds lost billions because enough Reddit users squeezed hedge fund shorts. There has been quite a bit of political fallout, with many funds attempting to ban the tools that allowed wallstreetbets users to ride GameStop “to the moon”.
For months, most thought that the Game Stop saga was a strange combination of events that would never occur again. Memes get old, after all, but apparently not this one. The most recent flavours of the month of r/wallstreetbets have been Blackberry, whose stock has increased 185 per cent in 2022, and AMC, a theatre chain, whose stock has increased by 862 per cent. The current flavour is Bed Bath & Beyond, which saw a 360 per cent increase since the start of August. Like other stocks, sharp rises come before swift falls from grace; half of BBBY’s august gains have since disappeared.
The Securities and Exchange Commission has yet to step in, though they are expected to make some moves. As the stock market has become increasingly accessible due to the rise of apps such as Robinhood, people are starting to worry about how much democratisation is a good thing. After all, depending on one’s point of view, the masses can easily be seen as a mob.