Reddit Makes AMC, GameStop’s Stocks Wild: A ‘Crazy’ ‘Ponzi Scheme’ ‘Train Wreck’

Stacks of cash are visible to GameStop shareholders. But for how long?

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Many young adults today spend their youth in Gametop stores. They lined up for the launch. He also bought and sold games and consoles. Now some of those people have made a fortune Buy company stock And encourage your friends on Reddit Buy it too. GameStop’s stock has bounced back more than ever before and all the activity among social media investors has taken it further. Wall Street made a heavy bet that the price would fall, causing the stock to surge wildly. In the midst of all this, Jaime Rogozinski, the outspoken founder of the Reddit community, told The Wall Street Journal that it is like “a train wreck that happens in real time”. Keith Gill, who helped stop the fight, told the paper “he didn’t expect it.”

On Thursday alone, GameStop’s stock hit an all-time high of $ 492.02 per share, only to drop more than half a minute later. It closed at $ 325 on Friday.

GameStop has not changed itself fundamentally in the last month. It is still a struggling retailer facing an uncertain future against the rising tide of online shopping. But its stock has gained up to 1,800% – which has not been a typo since the beginning of the year. This dynamic-led Wall Street investors bet against the future of the company to lose billions of dollars, and enthusiasm is Promotional driving even further.

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During the past week, the financial world watched in shock as Gametop stock rose to unimaginable levels. Even Elon Musk tweeted about it, pointing to his 43 million followers on a link to the Reddit community investing in GameStop, called R / Volkrabits.

At the close of regular trading on Wednesday afternoon, the stock was $ 347.51 per share, above historical lows of around $ 3.30 per share in the summer of 2019. And in the hours that followed, it plummeted over 37%, only to rise again. Thursday saw an even more dramatic move, with the stock bouncing back to $ 492.02 before dropping to $ 602 at 197.44. Then, after hours of trading, it rose to $ 311.99.

Meanwhile, stock market trading apps appeared either Stop or impose restrictions on GameStop share purchases For at least part of the day.

The popular stock trading app Robinhood attracted special attention to what One of the most restrictive new rules. People have been worrying about Robinhood for some time, saying that it is a “stock” to a potentially dangerous degree. It is now being accused of market manipulation, in which at least one class action lawsuit is already filed. Robinhood, for its part, said on Friday that market regulations effectively forced the imposition of those restrictions.

Read more: GameStop’s stock spike fueled by slag from Reddit’s r / WallStreetBets community. Here it means

“We’re seeing an event I’ve never seen,” said Jim Cramer, a Wall Street commentator and former hedge fund manager on CNBC, on Monday. And GameStop may be just the beginning. “this is insane.”

This may sound like a strange story about Wall Street investors that have been overrun by excited social media users. For some, it’s fun to watch those investors get taken to the cleaners by a swarm of people posting rocket emojis, saying that Gametop’s shares will go “over the moon”.


Reddit users are betting they can take GameStop shares “to the moon.”

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But for some on Wall Street, this is the latest sign of how social media can enhance everyday life. Twitter has changed the world of news and politics. YouTube and Instagram have transformed the fashion, beauty and entertainment industries. Now Reddit is taking over Wall Street.

These worlds are overlapping as well. Fans of Korean pop groups, known as K-pop, bring a flood of tweets about their favorite stars to overwhelm the racist hashtag on Twitter. And Ticktakers banded together in attempts to confuse President Donald Trump’s reunion campaign.

The now-emerging Reddit community is talking about taking on other companies that Wall Street is betting on broadly. The Reddit crowd is attempting to outdo the already popular handset maker BlackBerry, which is now primarily focused on selling commercial software. And Redditors are also targeting the struggling film series AMC, waving its stock to more than $ 8 per share at around $ 2 after hours of trading. It closed at $ 19.90 per share before dropping to $ 12.75 by Wednesday afternoon. On Thursday, it fell even further to $ 8.63 per share.

The actions of the Reddit community have had such an impact that TD Ameritrade took an extraordinary step earlier this week Stock trading limit On Game Stop and AMC stock, “out of an abundance of caution amid unprecedented market conditions.” Nasdaq also warned that it would stop trading on stocks that it thinks are being manipulated by social media.

Meanwhile, the traffic for the Reddit community at the center of the play, R / Wallcraftbats, is breaking records. According to a report by Mashable, r / WallStreetBets on Tuesday counted 73 million page views for its discussion boards. During the past week, it saw nearly 700 million page views. According to Comdcore, Reddit is already the 46th most popular site on the web, showing more than 78 million unique visitors in December. On Wednesday, Reddit’s mobile app lengthened its biggest single day of downloads, industry watcher Apptopia said.

But when the memes take off and the excitement fades away, GameStop will revert to that struggling video game retailer when gaming is increasingly moving toward streaming and the idea of ​​stepping into a physical store is still a nerve. – is likely to break Universal epidemic. At the time, stock analysts say, whoever left the shares, their value would evaporate.

“It’s unnatural, insane, and dangerous,” Michael Barri, a prominent Gametop investor and one of the subjects of the book and film The big short, Now written in a deleted tweet. As per Markets Insider’s report, the investment of about $ 17 million in the company increased to $ 250 million on Tuesday.


Many gamers spent their childhood at GameStop.

Patrick T. Fallen / Bloomberg / Getty Images

Who listens?

Michael Pachter, A long-time video game industry analyst at Wembush Securities, said earlier this week that he hadn’t even bothered to update his stock price expectations for GameShop since stocks started going crazy last week. “Who’s listening?” They said. “Nobody sells what a side-by-side analyst says right now.”

For them, there are reasonable explanations why people might get somewhat excited about GameStop. Before selling to PetSmart, Ryan Cohen helped convert Chevy, one of its newest board members, into one of the world’s largest online product vendors. GameStop is also on a track to be profitable again.

But now GameStop has not come close to explaining the stock price. “It’s a Ponzi scheme,” said Pachter, referring to a type of fraud that appears to be making money, but is actually only saved by funding from new investors. “There’s a point where it will go down.”

He suspects that this may happen after the company’s quarterly results were reported in March, at which point executives and investors are allowed to sell their shares.

One thing that surprises analysts is whether Reddit investors will lose millions whenever the stock eventually returns to Earth. Rogozinski, the man who helped find the Reddit community, said his approach is to invest more like gambling than traditional analysis and strategy. Its members, whom the community identifies as “degenerate”, often encourage each other to push all their funds into one stock, riding it up and down. Their positions are As punctual with idioms “Hold the line” and “Diamond hands” (hold on to your stock for a long time) and YOLO (you only live once).

He told the WSJ that he had never imagined the Reddit community as what it would become from its inception. “It’s like watching one of those horror movies, where you can see the bad guy slowly going up the stairs,” Rozowski said.

In fact, even Keith Gill, who helped kickstart the initial fight on Gamestop, told the community member that he was surprised what it turned out to be.

“I felt that this business would be successful,” he said, “but I did not expect what had happened in the previous week.”

Meanwhile, social media hype continues on Reddit, where users are announcing their intention to buy and hold more GameStop shares, all to send prices higher.

“My mom told me it’s time to sell,” a Reddit user wrote on a post about GameStop’s stock move. “Should I get a new mother?”

“Yes,” another user answered. “the answer is yes.”

Read more: Why GameStop, Blackberry Stock Suddenly Jumped, Thanks to Reddit

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