GameStop frenzy: how Reddit ‘nerds’ sparked a Wall Street bloodbath
- Hedge funds face billions of dollars in collective losses after small investors push ailing company’s stock price from US$18 to as high as US$380
- Regulators take notice amid concerns of that the stock market is in a dangerous bubble about to pop
Across most of America, GameStop is just a place to buy a video game. On Wall Street, though, it has become a battleground where swarms of smaller investors see themselves making an epic stand against the 1 per cent.
A group of amateur investors, organising using the online platform Reddit, has fought the trend. A group calling itself WallStreetBets with some three million members who exchange tips and boast about beating “the system”, is credited with pushing up GameStop shares and roiling the Wall Street establishment.
Some analysts have described the situation as a “nerds vs Wall Street” battle.
The funds serving the financial elite are starting to walk away in defeat. Big bets they made that GameStop’s stock would fall went wrong, leaving them facing billions of dollars in collective losses. All the wild action pushed GameStop’s stock as high as US$380 on Wednesday, up from US$18 just a few weeks ago.
The stunning seizure of power gives some validation to smaller-pocketed investors, many of whom are encouraging each other on Reddit and are trading stocks for the first time thanks to brokerages offering free-trading apps.