The WallStreetBets effect: What happened in GameStop's crazy week

How one subreddit — and a tech-friendly new way of investing — is shaping the market.

The WallStreetBets effect: What happened in GameStop's crazy week

Big day for GameStop.

Image: JJBers/Flickr

How do you push a stock up 140% in a few hours and 1,800% in a month, turning a once-crashing stock of a maybe-still-crashing company into one of the market's biggest winners? Well, you should ask r/WallStreetBets.

  • The 6 million subscribers to the r/WallStreetBets subreddit have long had market-moving power. And members have been pushing GameStop as a stock to invest in for almost two years, actually, based on what has seemed like fairly straightforward financial reasoning.
  • But the volume has gone crazy in the last few days. And the recent spike seems to come from something simpler: The WSB investors just … deciding to do it. A few enterprising investors decided to try to punish those who were shorting the then-still-cheap stock, because what you always need on the internet is an enemy.
  • That initial enemy was Andrew Left of Citron Research, who was a loud and large bettor against GameStop. Squeezing him — forcing him to buy more shares to cover his short position as the price went up, which then by itself would drive the price up — became goal No. 1 for WSB members. (Here's a good explanation of how that back-and-forth went down.)
  • That worked, which got other people on board, which caused larger investors to get in, which drove up the price, which made those first investors look like geniuses, which made more people pay attention. Round and round things went.
  • The WSB team is confident its strategy can work. "IM NOT SELLING THIS UNTIL AT LEAST $1000+ GME 🚀🚀🚀🚀🚀🚀 BUCKLE THE FUCK UP" was the title of a top post on the subreddit on Monday, from the user dumbledoreRothIRA.

The WallStreetBets investors see the moves as a power grab, taking the market back from the institutional investors who have always manipulated money in secret. For a while on Wednesday, the top post of on the subreddit was titled "FOR ALL THE BIG FUCKING HEDGE FUNDS MONITORING US, THIS IS A MESSAGE FROM US TO YOU, WE FUCKING OWN YOU NOW, FUCK. YOU."

Why GameStop, though? You can't overlook the connection with gamers, but it also helped that Michael Burry — one of the investors who predicted and made a fortune from the 2008 economic crisis — has been publicly saying the company was undervalued.

  • More recently, Chewy's Ryan Cohen bought a big stake in GameStop and has started pushing it to become a more viable online business.
  • It all sounds a bit like an internet con or a long-term troll, a bunch of people doing it for the lulz. "It certainly started as a meme. That's how WallStreetBets operates," Jaime Rogozinski, who created the subreddit, told Wired. But the lulz are moving the market.

GameStop's stock has had a wild week, up as high as $468 and down as low as $69 and often fluctuating wildly in the course of a couple of hours. Trading has been halted repeatedly, as the markets try to slow down the insanity, but to no avail. Insanity always immediately ensues.

  • Nobody caused a bigger jump than Elon Musk, who tweeted "Gamestonk!!" with a link to r/WallStreetBets on Tuesday night and promptly sent the stock up more than 100% in after-hours trading. Musk is a proven market-mover at this point, repeatedly moving prices up with a single vague tweet (even, in Signal Advance's case, when that stock has nothing to do with the product he's tweeting about).

The strategy worked gangbusters ... for some users. (It's easy to tell, because they love posting screenshots of their gains.) And they're not just focused on GameStop:

  • BlackBerry, for one, couldn't explain the sudden spike, but r/WallStreetBets could. "I AINT SELLIN 🚀🚀🚀🚀 BB TO THE FUCKING MOOONN 🌑🌑💎💎🤝🤝🚀🚀🚀🚀🚀," wrote user AnyHoneydew4, warning that even a brief dip in price was only a sign that things would keep booming.
  • The WallStreetBets crew is also betting on AMC, Tootsie Roll, Bed Bath & Beyond, Nokia and a number of other stocks that are both rich in 90s nostalgia and longtime favorites of short sellers. Their prices spent the week driving relentlessly upward.
On Thursday, Robinhood caused a ruckus when it banned users from buying new shares of GameStop and many of these other stocks. Robinhood cited "recent volatility" as the reason for trying to slow the market down, but all that did was turn investors' ire on Robinhood instead. They review-bombed Robinhood on the App Store, and began threatening and planning class-action lawsuits. Webull appeared to be the biggest beneficiary, as people looked for a new place to trade ... until it stopped allowing the same trades.
  • By Friday morning, though, things were back to relative normality. Rather than the more conspiratorial explanations for the stoppages on Thursday, it appears the answer was just that funding all those trades, for Robinhood or anyone, became really expensive. Robinhood, for example, reportedly raised $1 billion practically overnight just to be able to keep up.
  • Robinhood initially said it didn't have a liquidity problem, before ... ultimately determining it had a liquidity problem. "To put it in perspective, this week alone, our clearinghouse-mandated deposit requirements related to equities increased ten-fold," the company said on its blog. Single stocks like GameStop were trading so much they cost Robinhood hundreds of millions of dollars in deposits.
  • "Back to normal" doesn't apply to the meme stocks, of course. As soon as trading resumed on Friday, they shot back up; GameStop nearly doubled on Friday morning alone. And everything from AMC to Dogecoin (yes, really) was along for the ride.

The biggest remaining question, other than "when will the crash come," is what the regulatory implications will be here. Alexandria Ocasio-Cortez and Ted Cruz have both called for hearings into what happened with Robinhood, and appear likely to get them. And Elizabeth Warren took the SEC to task for not being more involved: "To have a healthy stock market, you've got to have a cop on the beat," she said. "That should be the SEC." Robinhood in particular is also facing huge damage to its reputation, even if it avoids the scarier legal ramifications.

But as much as anything, the GameStop Fiasco is a remarkable display of the collective power of the internet. Enough people, with enough motivation (and enough money) can turn a dying store that sells CD-ROMs into the most exciting company on Wall Street.

Updated: This story was updated on Saturday, Jan. 30, to reflect the (many, many, many) new things happening with GameStop since the story was written.

Fintech

Judge Zia Faruqui is trying to teach you crypto, one ‘SNL’ reference at a time

His decisions on major cryptocurrency cases have quoted "The Big Lebowski," "SNL," and "Dr. Strangelove." That’s because he wants you — yes, you — to read them.

The ways Zia Faruqui (right) has weighed on cases that have come before him can give lawyers clues as to what legal frameworks will pass muster.

Photo: Carolyn Van Houten/The Washington Post via Getty Images

“Cryptocurrency and related software analytics tools are ‘The wave of the future, Dude. One hundred percent electronic.’”

That’s not a quote from "The Big Lebowski" — at least, not directly. It’s a quote from a Washington, D.C., district court memorandum opinion on the role cryptocurrency analytics tools can play in government investigations. The author is Magistrate Judge Zia Faruqui.

Keep Reading Show less
Veronica Irwin

Veronica Irwin (@vronirwin) is a San Francisco-based reporter at Protocol covering fintech. Previously she was at the San Francisco Examiner, covering tech from a hyper-local angle. Before that, her byline was featured in SF Weekly, The Nation, Techworker, Ms. Magazine and The Frisc.

The financial technology transformation is driving competition, creating consumer choice, and shaping the future of finance. Hear from seven fintech leaders who are reshaping the future of finance, and join the inaugural Financial Technology Association Fintech Summit to learn more.

Keep Reading Show less
FTA
The Financial Technology Association (FTA) represents industry leaders shaping the future of finance. We champion the power of technology-centered financial services and advocate for the modernization of financial regulation to support inclusion and responsible innovation.
Enterprise

AWS CEO: The cloud isn’t just about technology

As AWS preps for its annual re:Invent conference, Adam Selipsky talks product strategy, support for hybrid environments, and the value of the cloud in uncertain economic times.

Photo: Noah Berger/Getty Images for Amazon Web Services

AWS is gearing up for re:Invent, its annual cloud computing conference where announcements this year are expected to focus on its end-to-end data strategy and delivering new industry-specific services.

It will be the second re:Invent with CEO Adam Selipsky as leader of the industry’s largest cloud provider after his return last year to AWS from data visualization company Tableau Software.

Keep Reading Show less
Donna Goodison

Donna Goodison (@dgoodison) is Protocol's senior reporter focusing on enterprise infrastructure technology, from the 'Big 3' cloud computing providers to data centers. She previously covered the public cloud at CRN after 15 years as a business reporter for the Boston Herald. Based in Massachusetts, she also has worked as a Boston Globe freelancer, business reporter at the Boston Business Journal and real estate reporter at Banker & Tradesman after toiling at weekly newspapers.

Image: Protocol

We launched Protocol in February 2020 to cover the evolving power center of tech. It is with deep sadness that just under three years later, we are winding down the publication.

As of today, we will not publish any more stories. All of our newsletters, apart from our flagship, Source Code, will no longer be sent. Source Code will be published and sent for the next few weeks, but it will also close down in December.

Keep Reading Show less
Bennett Richardson

Bennett Richardson ( @bennettrich) is the president of Protocol. Prior to joining Protocol in 2019, Bennett was executive director of global strategic partnerships at POLITICO, where he led strategic growth efforts including POLITICO's European expansion in Brussels and POLITICO's creative agency POLITICO Focus during his six years with the company. Prior to POLITICO, Bennett was co-founder and CMO of Hinge, the mobile dating company recently acquired by Match Group. Bennett began his career in digital and social brand marketing working with major brands across tech, energy, and health care at leading marketing and communications agencies including Edelman and GMMB. Bennett is originally from Portland, Maine, and received his bachelor's degree from Colgate University.

Enterprise

Why large enterprises struggle to find suitable platforms for MLops

As companies expand their use of AI beyond running just a few machine learning models, and as larger enterprises go from deploying hundreds of models to thousands and even millions of models, ML practitioners say that they have yet to find what they need from prepackaged MLops systems.

As companies expand their use of AI beyond running just a few machine learning models, ML practitioners say that they have yet to find what they need from prepackaged MLops systems.

Photo: artpartner-images via Getty Images

On any given day, Lily AI runs hundreds of machine learning models using computer vision and natural language processing that are customized for its retail and ecommerce clients to make website product recommendations, forecast demand, and plan merchandising. But this spring when the company was in the market for a machine learning operations platform to manage its expanding model roster, it wasn’t easy to find a suitable off-the-shelf system that could handle such a large number of models in deployment while also meeting other criteria.

Some MLops platforms are not well-suited for maintaining even more than 10 machine learning models when it comes to keeping track of data, navigating their user interfaces, or reporting capabilities, Matthew Nokleby, machine learning manager for Lily AI’s product intelligence team, told Protocol earlier this year. “The duct tape starts to show,” he said.

Keep Reading Show less
Kate Kaye

Kate Kaye is an award-winning multimedia reporter digging deep and telling print, digital and audio stories. She covers AI and data for Protocol. Her reporting on AI and tech ethics issues has been published in OneZero, Fast Company, MIT Technology Review, CityLab, Ad Age and Digiday and heard on NPR. Kate is the creator of RedTailMedia.org and is the author of "Campaign '08: A Turning Point for Digital Media," a book about how the 2008 presidential campaigns used digital media and data.

Latest Stories
Bulletins