For a brief moment, Aiden and his friends believed that they were investing gods.
Aiden is a 20-year-old business student at San Diego State University. In recent months, he and his friends have been drawn to Reddit’s WallStreetBets group, where users exchange stock tips and brag about their “diamond hands”. They bought GameStop and AMC Entertainment, two struggling companies that the group predicted would take off in a short time.
As the stocks skyrocketed, they liquidated other positions so they could place more in both. Then they celebrated by watching “The Wolf of Wall Street” together. Aiden, who asked not to use his full name, confidently predicted that his investment would skyrocket to $ 40,000.
“I was definitely convinced. We were all arrogant, ”he said. “I thought it was for the moon. Everyone on Reddit said they were going to the moon. “
AMC had a brutal year, as the pandemic forced cinemas to close around the world and led to an almost total loss of revenue. The company was burdened with debt even before it closed and had to seek several rounds of new financing to avoid bankruptcy. Shares plunged to less than $ 5 per share in September, and fell briefly to less than $ 2 per share in the first week of January.
But then WallStreetBets got involved. On January 27, the stock skyrocketed to $ 20, as users struggled to keep it in the hedge funds that had sold the shares. But the euphoria was short-lived. Robinhood, the platform preferred by many retailers, restricted purchases of inventory and several others the next day, and the price plummeted. It was trading at just over $ 7 on Friday.
Many of the retail investors who have rushed to the company in the past two weeks are still holding on, saying they believe it has good value in the long run, especially after the pandemic has passed.
“I like AMC. I like going to the cinema. One day we will be back in theaters, “said Vince Santoria, a 22-year-old student from Oswego, Illinois.” I may have invested a little bit with my heart, but that’s OK. “
Whatever happens with the stock, Santoria is ready to consider it a learning experience. He’s on Phi Kappa Psi at the University of Illinois at Chicago, and he and some of his fraternity brothers have a group where they talk about stocks, launching memes from WallStreetBets. But until he bought AMC and GME, he was a stalker for the Reddit group.
Santoria acknowledged that he was “a little late for both AMC and the GME group”. He bought AMC at an average cost of $ 15. He said he invested $ 3,000 to $ 4,000 in options and common shares and fell 53%. He has no plans to sell his common shares.
“I really enjoyed learning how to do things like trading options and what pressure is,” he said. “I may not win in this trade, but I learned something from him.”
Jordan Permenter, 27-year-old video editor from Ocala, Florida, said he also bought the shares because he believes in the future of AMC. He bought at $ 6.50 a share and said “he is still holding on for some reason”.
“This is the theater where I first saw ‘Star Wars’,” he said. When the pandemic is over, he predicted that “people will look forward to a big bucket of popcorn”.
On Wall Street, analysts are confused about the company’s prospects. Michael Pachter of Wedbush Securities argued that the increased interest from retail investors was a positive sign.
“I really believe that when we get back to normal, there will be six to seven months of higher grossing,” said Pachter Variety. “I think (the company) will prosper”.
But Eric Handler, an analyst at MKM Partners, said the company will still face huge indebtedness, even after returning to the cinema.
“It’s not just about overcoming the pandemic,” said Handler. “This is a company that remains highly leveraged. Survival comes at a very high cost. “
Verlin Campbell, who works with IT at Sony Pictures in Culver City, Calif., Said he bought shares in AMC in March or April. In his mind, it was like supporting a restaurant by buying takeaway food.
“It seemed to bet on my industry,” he said. “I didn’t do anything crazy. It was nothing that would make me rich or send me to the asylum. “
He did not expect the stock to rise until the public returned to theaters, so the Reddit craze took him by surprise. Once Robinhood limited his orders, he decided it was time to sell – and got rid of most of his shares for about $ 14, making a few hundred dollars in profit.
“It was fun,” he said. “As someone who was not from Reddit, I learned a lot and the country also learned and screwed with those guys from Robinhood.”
For Aiden, it was no fun. He said that as soon as his stock started to plummet, he had “the four hours of the most panic I have ever had”. He tried to limit the damage, but ended up losing a few thousand dollars at Gamestop and earning a little at AMC. One of your friends lost $ 10,000.
“I’m really humbled,” said Aiden. “I realized how stupid it was. Why do I think this is cool? I never considered myself someone who was easily manipulated by the media or social media. I have to question that now. I can’t see myself going back and doing what I just did again. “