In the middle–November, Fage138 bought shares in GameStop, a tenant in a basic shopping mall that sells electronic and gaming products. The shares cost $ 13 a unit, and he bought about 50 of them. Then, in the next two months, when he bought a few hundred more, he saw the stock price explode, setting the markets on fire with controversy and inducing one of the most dramatic handshakes in history.
Fage138 is not his real name, of course. Like most members of Reddit’s WallStreetBets channel, he prefers the anonymity of his nickname. He has been on the channel since the end of 2018, when he had less than 300,000 members. At the time, WallStreetBets had not yet made its name as a kind of collective investment vehicle, encouraging members to pour money into shares they considered undervalued. Nor did he become famous for targeting traditional institutional investors and short sellers directly.
Compared to many other WallStreetBets members, Fage138 seems reserved and considerate. He says he is an engineering student at the University of Alberta, Canada – “he doesn’t like to party much,” as he himself admits, and is happier playing Minecraft or scanning the skies with his telescope.
He invests separately, as a hobby. “I must have invested maybe $ 10,000 or more, at most,” he said. Many of your colleagues at WallStreetBets are older, in their 20s or 30s. “They are going to win or lose $ 100,000 or more,” he said. “There are not millions – they are not like hedge funds. The most I know anyone here has ever lost was $ 2.5 million. “
In essence, said Fage138, WallStreetBets is a forum for advocating good buys or risky high-value moves. When he joined, everyone was defending AMD, the semiconductor company, and anyone who made money from AMD’s stock was nicknamed “Su Bae” in honor of Lisa Su, the company’s chief executive. It is just one of the lexicon terms distinct from the channel. Among the less profane are the phrase “to the moon” and the rocket’s emoji, which accompany posts urging members to buy a stock and raise its price.
Fage138 insisted that members of WallStreetBets care about the fundamental value of a company. “In fact, any company with a market value of less than $ 1 billion is banned from the forum to avoid attempts at manipulation. Penniless, ”he said. But the forum is also animated by a clear distrust on Wall Street. “Many people here were at the beginning of their careers when 2008 happened,” said Fage138. “They lost their jobs and maybe their money. And then they saw that the banks and other institutional investors that leveraged the economy to the maximum, they suffered no consequences. “
A revenge against the short sellers
An eminence of WallStreetBet, with the nickname DeepFuckingValue, has been proposing the value of GameStop for months, posting videos on YouTube to explain why he felt good about the company: she had money in hand, she was turning to online retail, she was growing less profitable. Slowly, the stock price rose and, at $ 10 a share, members began to pay attention. It was in the middle of a pandemic year, and Fage138 admits that it looked like what Bloomberg columnist Matt Levine calls the “boredom market” – sitting around doing nothing and as long as his job is safe, a lot of disposable income to make something. But also, Fage138 said: “We are all, at the end of the day, a bunch of idiots who are having fun”. Buying GameStop, perhaps with the hope of reaching $ 30 a share, seemed like a fun thing to do.
In mid-January, the stock soared 60%. Fage138 remembers how the joke at the time was that everyone should hold on until the price reached $ 420.69 – funny references to marijuana and a sexual position. But soon after that, traditional investors and short sellers – those who had borrowed GameStop shares to bet against the company – began to protest the company, said Fage138. “The media only listened to the major hedge funds that were interested in the GameStop price dropping.”
At that point, said Fage138, WallStreetBets developed “a vendetta” against short sellers, oppressing them when buying stocks and options. “That’s when we started saying, ‘Don’t sell until you reach $ 1,000 per share’.” (And also, as a post advised, “Call your broker. Don’t allow your shares to be lent to these idiots.”)
Short sellers were then forced to buy GameStop shares themselves, to guard against the possibility that the price would rise further – a peak in demand that only pushed the price even higher. In January, GameStop rose 700%; after Elon Musk tweeted about it, its value exceeded $ 13 billion, up from $ 1.2 billion on January 1. In a booming market, GameStop added $ 91 billion in losses accumulated this month by short sellers.
GameStop’s $ 1,000 per share price is, Fage138 admits, absurd: “Anything above $ 70 per share is pretty ridiculous. But when you get a short squeeze, the intrinsic value and the market value are completely discontinuous. “
Be present in the mother of all short grips
Until January, Fage138 persisted in his studies, trying not to live up to the stock price. He noticed the media frenzy, of course: “Being on all news channels for an hour or being on Jim Cramer – that was more than we expected”. And he noticed more than half a million new members flooding WallStreetBets, looking to make money from the next move. “They are all welcome, although if they are just there without knowing what to do, we tell them to go away and read a little bit about the stock market.”
Fage138 doesn’t know what happens next, he said. He and his colleagues certainly made money; DeepFuckingValue is believed to have turned $ 50,000 into at least $ 14 million. He was concerned when he learned that the Redditors had harassed and hacked Citron Research, which was perpetually pessimistic about GameStop. “We always said, ‘Don’t do this. Don’t act like the establishment. No death threats. ‘”
But more than anything else, he said, “we don’t know what’s going to happen with this channel, as far as the SEC is concerned.”
The legality and dangers of coordinated movements on WallStreetBets are controversial. The channel can be seen simply as a transparent forum for exchanging market analysis and advice. Or, for its detractors, it could spark a kind of anarchic and manipulative market speculation. Institutional investors say they are concerned, in particular, with the anonymity of WallStreetBets members and therefore with the possibility that anyone can use inside information or false facts to choreograph market movements.
On Wednesday (January 27), after GameStop’s shares more than doubled in value, a government spokesman said the White House and the Treasury Department were monitoring the situation.
Fage138 doesn’t expect the GameStop journey to last much longer – maybe a month at most. When the price reaches $ 1,000, he said, he will realize the profits and reinvest them when the price drops again – a development he said he sees as inevitable. He decided that he would donate $ 1,000 to an environmental charity. “But it’s good to hang on and see what happens, to be part of the story – a part of the mother of all little grips.” In any case, another action will appear shortly.
At WallStreetBets, members want to believe they are at an inflection point. “So much information is available for free now,” wrote a user with the Benaffleks identifier on January 27. “There are no more negotiation fees. We have large communities that discuss stocks and trade openly. “
“TLDR: Fuck hedge funds. This is a crossroads for the future. “
A little later, however, benaffleks made an edit. He was being awarded “prizes” – a form of thanks paid to Reddit for a position. Go spend it on GameStop, he exclaimed. “THIS IS NOT AAAAHHH FINANCIAL ADVICE. Thank you.”