How Redditors shook the stock exchange
GameStop’s current stock price is about $325.00 as of writing. A month ago it was around $19. This massive jump in stock price was orchestrated by one Reddit user by the name of Roaring Kitty.
His real name is Keith Gill, and he works at a life insurance company and has two kids. On the side, he would live stream to YouTube educational content on the stock market. While the stock market in general is what he covers, has been monitoring the price of GameStop stock since at least April. Gill’s Twitter, with 704 posts, contains “$GME” in most Tweets. Sometimes that is the only thing in the tweet accompanying a meme. So how did the GameStop price rise so quickly from his rallying?
Gill and a group of others purchased GameStop stock options, which essentially is a way to reserve the right to buy a stock at a certain price and is considered safer than outright buying the stock. Options also allow the user to pull out from the trade at any time. GameStop at the time was what investors would call a “risky buy”. With the sales of games moving mostly to digital storefronts such as Steam, Epic, Microsoft and PlayStation, brick and mortar game stores struggled to keep up. All of this with a pandemic thrown on top, GameStop was looking at bankruptcy.
Gill was looking to profit off of a “short squeeze,” which Investopedia defines as “A short squeeze occurs when a stock or other asset jumps sharply higher, forcing traders who had bet that its price would fall, to buy it in order to forestall even greater losses. Their scramble to buy only adds to the upward pressure on the stock’s price.”
Overall it worked. In total, Gill invested $754,991.37, with over a 4000% gain, he now has over 46 million in his stock account. But Gill is not cashing out yet. This investment, along with others has become a rallying cry against the 1%. Memes poured onto Twitter citing the “reclamation of the stock market from the rich”. The app Robinhood also came into the picture when they removed the ability for users to trade GME and AMC stock, due to their perceived volatility. While they have recently opened those stocks back up for limited purchasing, users were unhappy with the removal. These stocks were locked by Robinhood, an app for entry-level stock trading, meaning that most of the people blocked from trading, were the ones that might have less say in the market.
Nilay Patel, @Reckless, noted on Twitter that Robinhood actually states in their terms and conditions that they have the right to lock trading on specific stocks on their platform.
Most of the commentary from those involved orbits around the idea that they have nothing to lose, only gain. Many posts on the r/Wallstreetbets subreddit have also come from people reporting that after trading GME, they were able to pay off different loans, bills, or other expenses that their regular income had prevented payment before. A common symbol on Reddit and Twitter has been the rocket emoji (🚀) showing that the stock is soaring, and that their destination is the moon.