AMC, GameStop stock swings: Reddit’s ‘insane’ campaign turning into a ‘train disaster’

GameStop is one of those stores that almost every player has a story about. Today’s young people spend their childhood in the company’s stores, buying and selling consoles and video games. Now, some of these people have made a fortune buying company stock and cheer up your friends on Reddit to buy also. All this activity between social media investors pushing the price up and Wall Street betting the price down, caused the shares to oscillate violently. Jaime Rogozinski, the apparent founder of the Reddit community at the heart of it all, told the Wall Street Journal that it’s like “a train crash going on in real time.”

On Thursday alone, GameSpot’s shares peaked at $ 492.02 per share, only to drop more than half a minute later. On Friday morning, he jumped another 75% to $ 341.

Although GameStop itself hasn’t changed much in the past month, its stock has risen up to 2,752% – that’s not a typo – since the beginning of the year. This dynamic has led Wall Street investors who bet against the company’s future to lose billions of dollars, and the excitement is taking the hype even further.

Last week, the financial world watched in shock as GameStop’s stock rose to unthinkable levels. Even Elon Musk tweeted about it, pointing to his 43 million followers a link from the Reddit community that invests in GameStop, called r / WallStreetBets.

At the close of the regular trading session on Wednesday afternoon, the stock was at $ 347.51 per share, above the historical lows of around $ 3.30 per share in the summer of 2019. And after the trading session, it fell more than 37 %, only to rise again. Thursday saw even more dramatic moves, with the stock rising to $ 492.02 before dropping nearly 60% to close at $ 197.44. Then, in the after-hours market, it went up again to $ 311.99.

Meanwhile, stock market trading app Robinhood seemed to stop buying GameStop during part of the day, while other companies imposed rules to limit some negotiations as well.

Read More: The increase in GameStop shares was driven by the slang of Reddit’s WallStreetBets community. Here’s what it means

“We are seeing a phenomenon I have never seen,” said Jim Cramer, CNBC’s Wall Street commentator and former hedge fund manager, during a segment on Monday. And GameStop may be just the beginning. “It’s insane.”

This may seem like a strange story about Wall Street investors being invaded by enthusiastic users of social networks. For some, it has been fun to see these investors being taken to the laundry by a lot of people posting rocket emojis, saying that GameStop’s stock will “go to the moon”.

But for some on Wall Street, it is the latest sign of how social media can change everyday life. Twitter changed the world of news and politics. YouTube and Instagram have transformed the fashion, beauty and entertainment industries. Reddit is now facing Wall Street.

These worlds also overlapped. Fans of Korean pop groups, known as K-pop stans, post numerous tweets about their favorite stars to crush racist hashtags on Twitter. And the TikTokers have come together in an attempt to confuse President Donald Trump’s re-election campaign.

Now, encouraged Reddit communities are talking about taking on other companies that Wall Street is betting heavily on. The Reddit crowd is already trying to boost BlackBerry, the once-popular handset maker that now focuses mainly on selling business software. And Redditors are also targeting the tough AMC film chain, pushing their shares from about $ 2 a share to more than $ 8 in after-hours trading. On Wednesday afternoon, it closed at $ 19.90 a share, before dropping to $ 12.75. On Thursday, it fell further to $ 8.63 a share.

The actions of the Reddit community had such an impact that TD Ameritrade took an extraordinary step earlier this week to stock trading limit on Game Stop and AMC shares, “due to the abundance of caution amid unprecedented market conditions”. Nasdaq also warned that it will stop trading in shares it believes are being manipulated by social media.

Meanwhile, traffic to the Reddit community at the center of the drama, WallStreetBets, is breaking records. WallStreetBets recorded 73 million page views in its discussion forums on Tuesday, according to a report by Mashable. Last week, it reached about 700 million page views. Reddit is already the 46th most popular website on the web, reaching more than 78 million unique visitors in December, according to comScore. And on Wednesday, Reddit’s mobile app recorded its biggest single download day, said industry watcher Apptopia.

But when the memes stop and the excitement wears off, GameStop will return to being that struggling video game retailer at a time when games are increasingly moving toward streaming and the idea of ​​entering a physical store is still a stressful outlook during a pandemic. At that point, stock analysts say, whoever has held the stock will see its value evaporate.

“This is not natural, insane and dangerous,” Michael Burry, a prominent GameStop investor and one of the themes of the book and the film The Big Short, wrote in a now deleted tweet. Its investment of around $ 17 million in the company soared to $ 250 million on Tuesday, Markets Insider reported.

Who listens?

Michael Pachter, a longtime video game industry analyst at Wedbush Securities, said earlier this week that he had not even bothered to update his share price expectations for GameStop since the shares started going crazy last week. “Who’s listening?” he said. “Nobody cares what a sales analyst says now.”

For him, there are reasonable explanations why people can get a little excited about GameStop. One of his newest board members, Ryan Cohen, helped turn Chewy into one of the largest online pet product sellers in the world, before selling him to PetSmart. GameStop is also on track to be profitable again.

But that doesn’t come close to explaining GameStop’s stock price now. “It’s a Ponzi scheme,” said Pachter, referring to a form of fraud that appears to generate money, but is in fact only sustained by financing new investors. “There is a point where it will fall.”

He suspects that this could happen after the company released its quarterly results in March, when board executives and investors could sell their shares.

One thing analysts watching are wondering whether Reddit investors will lose their millions whenever stocks return to normal. Rogozinski, the man who helped found the Reddit community, said his approach to investing was more like a game than traditional analysis and strategy. Its members, which the community identifies as “degenerates”, often encourage each other to put all of their funds into one action, increasing and decreasing. Your posts are punctuated with phrases like “hold the line” and “diamond hands” (hold your stock for a long time) and YOLO (you only live once).

He told WSJ that he never imagined that the Reddit community would change from the beginning to what it has become. “It’s a bit like watching one of those horror movies where you can see the thug walking up the stairs slowly,” said Rogozinski.

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

“My mom told me it’s time to sell,” wrote a Reddit user in a post about GameStop’s stock moves. “Should I find a new mom?”

“Yes,” replied another user. “The answer is yes.”

Read More: Why GameStop, the shares of BlackBerry suddenly rose, thanks to Reddit