The past year (or really, years) haven’t been the easiest for GameStop, as digital codes and online shopping have effectively eclipsed the formerly ubiquitous experience of heading to your local video game store to find the latest release or a great price on a used game. Yet this week, the retailer is making headlines — and history — as its stock prices have soared.
Completely understanding exactly how this happened takes some stock market knowledge that goes far beyond what I learned in the single economics course I took in college, but here’s the bottom line: It’s an example of online community/fandom in action.
According to multiple sources, things started with the Reddit community r/wallstreetbets, where users realized that Wall Street had basically decided that GameStop was going to fail and bet on that fact. So, those same Reddit users all worked together to create false demand for the stock, driving up the price by more than 800%. Then, Elon Musk tweeted about it, which pushed the price even higher. As of this morning, GameStop shares were listed at more than $400 each, a far cry from the consistently under-$20 prices it’s seen for the past year. (Truly, the line graph is wild.)
Of course, the legality of the situation is a bit fuzzy, and it has sent Wall Street into somewhat of a crisis — Hedge funds that bet against GameStop are seeing massive losses.
Also, now that the internet has discovered this almost meme-like way to manipulate the stock market, there’s nothing stopping the masses from doing so again and again. Yesterday, AMC got a similar treatment. #SaveAMC was trending on Twitter as people started investing. While the price didn’t hit the same levels that GameStop has, it still saw a significant increase in price, from about $5 per share on Monday and Tuesday to a high of $20.30 yesterday morning. And this has some very real consequences for the theater chain, which has been struggling significantly due to the COVID-19 pandemic. According to MarketWatch, AMC will be able to reduce its debt by $600 million by converting its convertible senior notes into Class A common shares.
In response to all of this, brokers have taken steps to restrict trading in GameStop stock. Platforms such as Robinhood and Interactive Brokers also added some restrictions for trading stock in GameStop, AMC, and a few other companies. Now, as I type this, the GameStop stock price has started to plummet again, due to these restrictions.
Discord also banned the r/wallstreetbets server, and the subreddit went private yesterday for about an hour, coming back with a message from the moderators titled “Where do we go from here and who is going to step up and help us?”
While the situation has certainly produced a treasure trove of funny Tweets and made many of us learn stock market terms for the first time ever, the situation is still unfolding, showcasing the power of fandom and potentially altering the stock market.