Subreddit vs Hedge Funds


From $2.57 to $483 in the span of a couple of weeks, all thanks to a subreddit, history was made. 

After all the GameStop pandemonium has seemed to settle, let’s look into what this all really means, and how the stock market could possibly impact society in the future. 

Hedge funds control the ebbs and flow of the stock market, and the top 1% rule Wall Street. This is how it has been and continues to be. Then there’s Gamestop a slowly failing business, the video game version of Blockbuster. The hedge fund Melvin Capital decided to get involved, they shorted the stocks meaning they tried to hedge market risk by selling short stocks that they consider overvalued. The subreddit noticed this play in action and this was when Melvin Capital’s plan fell into shambles. 

To spite hedge funds that consistently get bailed out by the government, and the hedge funds that contributed to the 2008 Great Recession, the subreddit WallStreetBets decided to wage war. Collectively agreeing to buy up the stocks and getting social media involved, the price started the skyrocket. The stock buying and sharing app Robinhood also allowed the average investor to get in on the action. Game Stops’ market value increased from $2 billion to a hefty $24+ billion, and the stock prices rose 1,700%. A well thought out war that was waged against Wall Street giants on a singular subreddit, the same platform where fans of comedians like Cody Ko bully him for his long hair and fear of horses. This platform has allowed for a community to momentarily topple an empire. 

The internet is definitely accountable for the surge of middle-class investors, people are able to get involved for free. Apps like Robinhood allow for the everyday investor to get a glimpse into the world of the stock market. It allows users to trade for free and there are no account minimums and zero commission. The downside is that those investing without assistance or knowledge may not reap any benefits from the stock market and if they have a loss it could be an impactful financial loss. Class-action lawsuits have arisen recently in response to Robinhood controlling and blocking stock purchases for GME as the prices had started to rise. 

Although some of these investment companies leave investors hanging, with help from others and platforms where users can assist each other in their ventures, Wall Street could finally benefit the middle class. 

This is just the beginning.