IGN has reached out and spoken to several r/WallStreetBets day traders to find out more about this group that has thrust the struggling video game retailer into the spotlight.
What Is Going on with GameStop Stock?
GameStop stock (traded as $GME) is on the up-and-up. Prices for a single piece of stock peaked today at around $145. Compare that to a year ago, when prices for the biggest video game brick-and-mortar retailer hovered around $15 but went as low as $3 a share.
GameStop in the News Timeline
Some Wall Street investors bet that GameStop would continue to struggle and began short-selling the company, a strategy where an investor borrows stock of that particular company — in this case, GameStop — and sells it in the hopes that prices for the stock will continue to drop. If that happens, they can buy back the stock for even cheaper and keep the difference as a profit.But instead of going down, prices are going up, and this is bad for short sellers who have to buy back the stock they borrowed. Redditors on r/WallStreetBets saw the short early and moved in to buy GameStop stock early and cheap, creating a short squeeze.
Short sellers rushing to buy while minimizing losses created a rush to buy GameStop stock, which in turn drove up prices. A vicious cycle, if you will.
Who Is Squeezing Wall Street?
In speaking with traders on r/WallStreetBets, it’s evident that these traders are not wolves of Wall Street, but hobbyists who trade on the side and have either a clear-eyed or irreverent view of the stock market.
Three traders from r/WallStreetBets IGN spoke to say that they are not full-time traders, while a fourth says they’re still relatively new to trading. And all three also joined the community fairly recently with the longest member following the subreddit about a year ago.
“I had seen the subreddit in some YouTube video after I got into trading but was only doing my own thing until this GME stuff really started to pop off and I bought in,” one trader, who asked to go by Ike for privacy reasons, tells IGN.
Ike bought GME stock when it was around $30 and says he spent about $600 on his position. He says his option is now worth around five times that value but is still waiting before selling.
When asked why they went in on GME, Ike says that it took “some convincing” and due diligence but that it was “mostly FOMO [or, Fear of Missing Out].”
Another trader named Tj says they invest “on the side for fun,” while working as a full-time engineer at a major tech company. Their option is worth six-figures after going in at a buying price of around $18 per stock.In keeping with their 4chan with a Bloomberg Terminal mantra, these traders prefer memeing their way through Wall Street, using terms like FOMO or YOLO [You Only Live Once] to explain away their investment decisions.
One investor named Sage says they’ve only been following r/WallStreetBets for “around two months” and that investing is a “side hustle.” For “about five minutes” Sage’s GME options were worth $33,000, based on an initial investment of $1000. Though they chose not to sell.
The biggest success story is someone who goes by u/DeepFu*kingValue on WallStreetBets who regularly updates the subreddit on the price of their option which is currently valued at $13 million.
The energy the subreddit brings into trading can only be described as chaotic. One thread by user u/dumbledoreRothIRA is titled, “I’M NOT SELLING THIS UNTIL AT LEAST $1000+ GME” with an additional expletive and some rocket ship emojis for good measure.
The subreddit is also claiming a “victory” against hedge fund Melvin Capital Management, a short-seller that the Wall Street Journal reports is getting an outside investment to help stabilize the fund after a variety of short bets fell through. One of which was Melvin’s bet against GameStop.
GameStop, a Meme?
One reason why the GameStop stock situation is so absurd is that for the past three years, GameStop has been struggling as a business. A brick-and-mortar video game retailer, GameStop has not been able to compete with digital retailers like Amazon as well as the growing trend of customers buying primarily digital versions of games through portals like Steam, PSN, or Xbox Live.
When IGN spoke with GameStop’s chief customer officer Frank Hamlin back in 2019, he explained that “As a specialty retailer, we are linked at the hip to this category of video games. We compete with a bunch of generalist retailers who don’t have the same seasonality as we do because they sell paper towels and loaves of bread and they can use video games as a loss leader to sell a loaf of bread.”
The increased competition has forced GameStop to close around 400 and 450 stores in 2020, and the COVID-19 pandemic has not helped physical retailers like GameStop in the least.
But GameStop is a mainstay in the public gaming consciousness, and the brand recognition has driven WallStreetBets to embrace the struggling brand. Whereas investors on Wall Street proper saw a struggling retailer, WallStreetBets saw an underdog and piece of gaming childhood.
GameStop – Experimental Stores
Sage says that while “Reddit Hype” factored into their decision to go in on GME, so did “childhood memories.” Meanwhile, Tj tells IGN that their non-retirement investing is done with additional income. “So I figured might as well throw it into the latest meme and let it ride,” they said.
Another trader who spoke with IGN named Branyan said that knowing GameStop helped them go in on their own position.
“I’ve done my fair share of shopping there,” says Branyan. “It definitely did make a difference that I knew the business opposed to going in blind. I’ve trusted them with my business so I should be able to trust them with my trades.”
Ike says they were very aware of GameStop both from their childhood and recent news. “Like most my age [GameStop] used to be a place I’d go often for games as a kid, and I knew about its decline as I’ve watched the closure of one [of the stores] close to me.”
However, Ike cites the addition of pet retail giant Chewy’s co-founder Ryan Cohen to GameStop’s board and the company’s attempts to remodel some of its stores into experiential event spaces as signs of positive change.
What Happens Next?
One side-effect of the GameStop Stock squeeze is the increased scrutiny on r/WallStreetBets. Mainstream and finance-focused publications are covering the subreddit in recent days — and not in a way the community finds helpful.
“News coverage has been unfair and misleading, often referring to WSB as a single entity that makes decisions for millions of people,” says Ike. “But take only a glance at the sub and you’ll see just how wrong that is, [it’s] full of people taking all sides [on an investment] and people posting random sh*t half the time.”
Tj says they’re worried that the media coverage could harm inexperienced investors “jumping into stocks without researching.” They believe that “a lot of people will lose more than they can afford to,” because of the notoriety.“Well to tell you the truth [the media coverage] is very worrisome,” Branyan adds. “Many subreddits have been shut down in the past and wiped out due to getting negative media coverage. The coverage we’re getting now seems to want to suggest that we are attempting to manipulate the market as a collective single organism. This isn’t the case. We are just a bunch of investors who like to chat about what we do.”
“People make huge YOLOs and succeed sometimes and people like to see that. That is what you’ll find at the base of WSB. People making it big or losing it all trying. We aren’t trying to manipulate the market, we’re trying to go big or die trying. Each and every one of us.”
As for their GME options, the investors say they’ll eventually sell and hopefully make a profit.
“I’ll sell when u/deepfu*kingvalue sells,” Sage says.
Matt T.M. Kim is a reporter for IGN.