By mass-buying securities of a struggling company, WallStreetBets stock marketers have stood up to hedge funds.
The GameStop share price has skyrocketed from WallStreetBets investments. © Tada Images – stock.adobe.com
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WallStreetBets (WBS) is originally a subreddit (r / wallstreetbets) which brings together investors who are adept at daring bets. Their goal is simple: hope to make profits by coordinating and taking risks, sometimes significant.
A stock that flies, heavy losses for an investment fund
In recent weeks, members of WBS have been in the headlines, in particular for having bet big on GameStop, a chain of video game stores (which owns Micromania, for example). In financial difficulty, the brand has struggled to revive in recent months, and the value of its stock market share was only $ 2.57 in March 2020. Several investors, such as the hedge funds Melvin Capital, bet on a deterioration in its financial health, and sold it short (without actually owning the shares, but with the intention of buying them back cheaper later).
This was without counting on WBS investors, who flocked to GameStop shares, causing the share price to rise dramatically ($ 347). The Melvin Capital group even had to be bailed out to the tune of $ 2.75 billion to meet the rising share price.
Elon Musk takes action on Twitter
The founder of Tesla also took sides in this surreal story. Indeed, he posted a tweet with the WallStreetBets subreddit link, adding the mention « Gamestonk!! » (pun that combines GameStop and “stonk”, a common term in the stock market world). As with every tweet from the billionaire, this message had an explosive media reach, gathering more than 40,000 retweets and 200,000 likes.
Gamestonk!! https://t.co/RZtkDzAewJ
— Elon Musk (@elonmusk) January 26, 2021
A craze that leads to overflows on the platforms
The WBS movement grew so big in such a short period of time that Reddit moderators were forced to keep it private for a few hours, due to some rule-breaking behavior.
The WBS Discord server has also been removed and banned by the company, due to a “Repetition of hateful and discriminatory content, despite several warnings”. WBS moderators expressed their dissatisfaction with this decision through a statement posted on the subreddit.
And after ? The American regulator (SEC) could intervene, and decide on a trade suspension or an investigation for manipulation. The members of WallStreetBets have obviously bet on other actions such as those of Nokia or BlackBerry.
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