Redditors Take On Wall Street

By: Julia Hoesk

On January 27th, 2021 the state of the stock market caught the attention of national news and even the White House. It all started when a hedge fund, Melvin Capital, placed a large bet against the company GameStop, predicting that their price would go down. This practice is called “shorting the stock”, and is a well practiced strategy by hedge funds, which in many cases forces a company to tank while the hedge fund profits off of it. A reddit forum called “r/WallStreetBets”, dedicated to talking about and giving advice on the stock market, found out about Melvin Capital short-stocking GameStop. They decided to invest in its stocks, causing the price for each share to skyrocket upwards of  1,700%. In efforts to teach Wall Street a lesson, these average-joes have cost hedge funds, like Melvin Capital, billions of dollars in losses. But the investing didn’t stop just with GameStop. These redditors decided to invest in other dying companies like BlackBerry, AMC, and BlockBuster costing hedge funds billions, and profiting off it as well. Amatuer investors a part of r/WallStreetBets are planning on forcing short-selling hedge funds into a “short-squeeze”, which makes it so they have no other option than to buy back their borrowed shares, but for a higher price than they sold it for, this being the primary reason for them losing so much money. 

 

It’s no surprise that hedge funds and the Wall Street elite are mad at reddit users for beating them at their own game. Many amatuer investors are simply calling it like it is: these entities only support a capitalist free market when it benefits them. However the parameters of the “free market” are now up for a debate. The brokerage app, Robinhood, helps new investors easily trade stocks for free of charge. Many people involved in the reddit uprising used the app for its ease and accessibility to the average person. As of January 28th, 2021, Robinhood has restricted all trade in stocks for companies including GameStop, AMC, Nokia, etc. Robinhood was called out for possibly conspiring with hedge funds to stop trading in GameStop, however the company denies any allegations of doing so. 

 

Despite the current hyper-partisanship in American politics, anger for such trading restrictions is shared by both Democrats and Republicans. Progressive U.S. Representative, Alexandria Ocasio-Cortez tweeted out, “We now need to know more about @RobinhoodApp’s decisions to block retail investors from purchasing stock while hedge funds are freely able to trade the stock as they see fit.” To which Republican U.S. Senator Ted Cruz responded fully agreeing with AOC’s statement. 

 

Concerns of more restrictions on the free market come from Janet Yellen, the Treasury Secretary in President Joe Biden's cabinet. Yellen reportedly received around $810,000 from Citadel, the company that owns the hedge fund Melvin Capital. Considering her possible conflict of interest, some believe Yellen should recuse her position as Joe Biden’s advisor. Many are anticipating that in the next few weeks the government will pass legislation on regulating the individual’s ability to trade in our so called “free market”. Anger shown by both leftists and right-wing populists both conclude that big business and the government are too focused on small investors rather than addressing the misconduct made by the elites of Wall Street.

 

With many news outlets being accused of trying to scare retail investors into selling their stocks by using fear mongering tactics, the call on Reddit to “Hold your stocks” and “Make them pay” is echoing throughout the “r/WallStreetBets” forum. It's amazing how in one week reddit users playing into the meme of skyrocketing GameStop stocks has essentially turned into a class war between elites and the common-person.