• James Fan

The rise of GameStop and the fall of Wall Street traditions

The great GameStop short squeeze of recent weeks has taught millions of Americans about what exactly “shorting” a stock means — and taught all of us about the power of social media to organize a mass investor movement. There’s a bull near Wall Street, north of the Financial District in Manhattan. Arturo di Modica, the Italian sculptor who built it, wanted it to represent the antithesis of the 1987 Wall Street crash, when the stock market lost over 20% of its value on a single day during fine economic times, which taught millions about how computerized trading systems work — or create havoc. Modica, who’s now 80 years old, watched as the bull was vandalized with stickers to protest and taunt hedge funds that had previously shorted $GME (GameStop Corporation) hoping to cash in.

The common perception of a GameStop store is a dusty, dirty store with flickering lights, expensive games, and an employee sleeping on the job. The stock certainly highlighted these facts — before the craze, GameStop was trading $18 per share, which in Wall Street circles is known as “not profitable.” Certainly, many people laughed blatantly when members of the r/wallstreetbets Reddit community claimed GME would trouble hedge fund managers, as they continued investing more in the stock. But Wall Street, drunk on power, hadn’t estimated the power of social media, and on January 27, 2021, GME peaked at $347.51. This meant to minimize losses, hedge funds had to short even more shares, which drove the price up even higher. Other stocks, such as $AMC (AMC Entertainment Holdings Inc.) also soared by the power of the Reddit community.

This figure became a mascot for those rallying GameStop to an incredible peak of 300 dollars per share.

Over at wallstreetbets, the community jumped from 3 million members to nearly 9 million in a few days. Elon Musk jumped on his Twitter account to promote GME. Reddit had to shut down the community for a few hours because of the traffic it was receiving. And it was all orchestrated by one man, u/DeepF***ingValue, who on that fateful day made $33 million dollars. These events also led to the fall of the stockbroker, Robinhood, which prides itself on its business model allowing easy trading. This clearly wasn’t true, because after a few days Redditors woke up to Robinhood selling shares without permission and blocking sales of more shares. The service was exposed, and many people recommended a switch to Webull, which then led to Reddit, Robinhood, and Webull leading the 1-2-3 in the “Top Free Apps” in the Apple App Store. TikTok was nowhere to be found.

This debacle has three main takeaways. One, trading isn’t easy. Two, social media is influential to the point where it drives the stock market. And three, never, ever, ever, invest in a stock just because it is popular and has potential that has been unearthed by others.


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