IGN got in touch and spoke with several day traders from r / WallStreetBets to learn more about this group that put the video game retailer at the center of attention.
What’s going on with GameStop stock?
GameStop shares (traded as $ GME) are up. Single share prices peaked today at around $ 145. Compare that to a year ago, when the prices of the largest traditional video game retailer hovered around $ 15 but fell to $ 3 per share.
Some Wall Street investors bet that GameStop would continue to fight and started shorting the company, a strategy in which an investor borrows shares in that particular company – in this case, GameStop – and sells them in the hope that stock prices actions continue to bring down. If that happens, they can buy the shares back for an even cheaper price and keep the difference as a profit. But instead of falling, prices are rising, and this is bad for short sellers, who need to repurchase the shares they borrowed. Redditors on r / WallStreetBets saw short sales early and started buying GameStop shares earlier and cheaply, creating a small squeeze.
Short sellers rushing to buy while minimizing losses created a rush to buy GameStop shares, which in turn raised prices. A vicious cycle, if you will.
Who’s pressing Wall Street?
When speaking to traders on r / WallStreetBets, it is clear that these traders are not wolves of Wall Street, but amateurs who trade in parallel and have a clear or irreverent view of the stock market.
Three traders at r / WallStreetBets IGN said they are not full-time traders, while a quarter said they are still relatively new to trading. And all three also joined the community recently, with the oldest member following the subreddit about a year ago.
“I had seen the subreddit in some YouTube video after I started trading, but I was just doing my own thing until GME stuff really started to pop up and I bought it”, a trader, who asked to pass by Ike for privacy reasons, says IGN.
Source: Google.
Ike bought GME shares when they were around $ 30 and says he spent about $ 600 on his position. He says his option is now worth about five times that amount, but he is still waiting before selling.
When asked why they joined GME, Ike said it took “some convincing” and due diligence, but it was “mostly FOMO [or, Fear of Missing Out]. “
Another trader named Tj says they invest “for fun” while working as a full-time engineer at a major technology company. Their option is worth six digits after entering at a purchase price of around $ 18 per share.According to their 4chan with a Bloomberg Terminal mantra, these merchants prefer to memeing their way through Wall Street, using terms like FOMO or YOLO [You Only Live Once] to explain your investment decisions.
An investor named Sage says that he has only followed r / WallStreetBets for “about two months” and that investing is a “side rush”. For “about five minutes,” Sage’s GME options were worth $ 33,000, based on an initial investment of $ 1,000. Although they have chosen not to sell.
The biggest success story is someone using u / DeepFu * kingValue on WallStreetBets who regularly updates the subreddit on his option price, which is currently valued at $ 13 million.
The energy that subreddit brings to trading can only be described as chaotic. A user thread u / dumbledoreRothIRA is titled “I AM NOT SELLING THIS UNTIL AT LEAST $ 1000 + GME” with an additional expletive and some rocket emojis for good measure.
The subreddit is also claiming a “win” against hedge fund Melvin Capital Management, a short seller who the Wall Street Journal reports is receiving an outside investment to help stabilize the fund after a series of short bets went awry . One of them was Melvin’s bet against GameStop.
GameStop, a Meme?
One reason GameStop’s stock situation is so absurd is that, for the past three years, GameStop has struggled as a business. A traditional video game retailer, GameStop has been unable to compete with digital retailers like Amazon, as well as the growing trend of consumers buying mainly digital versions of games through portals like Steam, PSN or Xbox Live.
When IGN spoke with GameStop customer director Frank Hamlin in 2019, he explained that “As a specialist retailer, we are connected to this category of video games. We compete with a group of general retailers who don’t have the same seasonality as us because they sell paper towels and bread and can use video games as a loss leader to sell bread. “
The increased competition has forced GameStop to close some 400 and 450 stores in 2020, and the COVID-19 pandemic has not helped physical retailers like GameStop.
But GameStop is a pillar of the public’s gaming awareness, and brand awareness has led WallStreetBets to embrace the struggling brand. While Wall Street investors themselves saw a struggling retailer, WallStreetBets saw an underdog and a piece of the players’ childhood.
Sage says that while “Reddit Hype” influenced his decision to join GME, so did “childhood memories”. Meanwhile, Tj tells IGN that his non-retirement investments are made with additional income. “So, I thought it best to throw that at the latest meme and let it run,” they said.
Another trader who spoke with IGN, called Branyan, said that knowing GameStop helped them take their own position.
“I did my fair shopping there,” says Branyan. “It definitely made a difference that I knew the company was opposed to going blind. I trusted them with my business, so I should be able to trust them with my dealings. “
Ike says they knew a lot about GameStop since childhood and recent news. “Like most of my age [GameStop] it used to be a place that I used to go to games often as a kid, and I knew about its decline as I watched a [of the stores] close to me.”
However, Ike cites the addition of co-founder of pet retail giant Chewy, 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?
A side effect of the GameStop Stock squeeze is the biggest scrutiny on r / WallStreetBets. Conventional, finance-focused publications are covering the subreddit for the past few days – and not in a way that the community finds useful.
“The news coverage has been unfair and misleading, often referring to the WSB as a single entity that makes decisions for millions of people,” said Ike. “But just take a look at the submarine and you’ll see how wrong it is, [it’s] full of people taking all sides [on an investment] and people posting random shit in half the time. ”
Tj says they are concerned that media coverage could hurt inexperienced investors “by jumping into stocks without researching”. They believe that “many people will lose more than they can” because of the notoriety.“Well, to tell you the truth [the media coverage] it’s very worrying, ”adds Branyan. “Many subreddits have been closed in the past and eliminated due to negative media coverage. The coverage we are getting now seems to suggest that we are trying to manipulate the market as a single collective body. This is not the case. We are just a bunch of investors who like to talk about what we do. “
“People make great YOLOs and sometimes they are successful and they like to see it. This is what you will find at the base of the WSB. People making success or losing everything trying. We are not trying to manipulate the market, we are trying to grow or die trying. Each and every one of us. “
As for GME options, investors say they will eventually sell and, hopefully, make a profit.
“I will sell when u / deepfu * kingvalue sells,” says Sage.
Matt TM Kim is an IGN reporter.