What's going on with the news these days? From falling Covid-19 R-rates in Europe to Biden's executive orders, for the first time in forever, it feels like there's a bit of positivity in the air. But my absolute favorite story in a long time goes to GameStop, the 37-year-old chain store group that finds itself caught in a David-and-Goliath battle between an insurgency of small, online investors and bigwigs of Wall Street. If you still needed proof that we are living in crazy times, then this is it.
An extremely simplified version of the story goes like this: Like many companies, GameStop has found itself in rough shape, so a lot of huge investors made a ton of short-sales, hoping it would fail in a way that makes them money (more on this in a minute).
Noticing this, Reddit users banded together on r/wallstreetbets and juiced the market, buying a ton (like, billions) of stock through easy to use apps. That's why it's being branded "meme stocks." (I mean, can you think of a more zeitgeisty term?) The stock price has soared from $96.80 to $347.50 in the past three days — a rise of 359 percent. One user, known as “u/DeepFuckingValue,” has turned an investment of $754,991 into a figure nearing $50,000,000.
The hedge fund — guys like this — are not enjoying the taste of their own medicine. Consider it poetic justice.
Coming back to the point before, short-sellers are gamblers (see also, leeches) who make money on a company going down the tubes, facing bankruptcy, or seeing its stock prices fail in a big way. They want the price to fall to make money, so rather than buy low/sell high, they are selling high first, then buying it low when the price goes down. Essentially, they are betting on the company to fail. If that doesn't happen and it increases in price for some reason (as in the case of GameStop), short-sellers are forced to buy back the stock to close out their losing positions, boosting demand for the stock in question. That's called a short-squeeze.
If you're still puzzled, here's an ELI5 allegory I dug up from Reddit starring cuddly apes (small investors) and poisonous snakes (Wall Street):
Let's say 5 bananas currently cost 10 dollars.
One ape on the market has 5 bananas.
Snake asks to borrow 5 bananas for a bit and instead sells the 5 bananas thinking the price will go down soon (shorting). he thinks he can buy them later for less and give them back to ape, so he makes a profit on the difference.
A group of apes notices what stupid snakes are doing and decide to buy all bananas on the market until snakes have no other choice than to buy from the group of apes in order to return what they borrowed.
If the group of apes stay strong then the banana price will go up.
There is a multi-billion dollar hedge fund (snake) that has shorted GameStop (they've bet that the stock price will go down). People on Wallstreetbets (apes) noticed this and told everyone that if they buy GameStop stock this hedgefund will lose billions of dollars. This is starting to come true.
If it continues the investors hope that the GME stock price will skyrocket and they will be able to sell for lots of profit.
Already, two investment firms that had placed bets for money-losing GameStop’s stock to drop have raised the white flag. That's hilarious but doesn't actually matter in the grand scheme of things (take a look at the sub and you'll see how it's full of general piss-taking, self-deprecation, rocket emojis, and words like "stonks"). If the small investors lose their money at the end of this, then fine, because it was merely the price of admission to watch the hedge funds get screwed.
The situation is incredible to watch unfold, and not only a testament to the power of the collective, but what can be achieved when people — even online — band together. There's talk about what can be the next target for potential breakout gains (names like Nokia, BlackBerry, and AMC Entertainment are being thrown around), which suggests there's some mileage in this movement yet.
For a lot of those who have invested, it's not about turning profit, but fucking over the man — a bit like people-versus-the-profiteers, have-nots-taking-on-the-haves. There are calls demanding the SEC investigate the legality of these organized efforts, but it's hard to see how a case can be made for manipulation when no laws are being broken. Unsurprisingly, this is how hedge-funds operate on a normal day.
It's a way of acting that embodies the kind of anti-establishment mindset that drove streetwear initially and mirrors where it's headed now. The always on point Bobby Hundreds summed it up in a blog post (you should bookmark it it here) last night, where he discussed the power of the collective, the Internet, and citizen self-mobilization: "We are used to watching young communities rally together to up-end systems. Our culture thrives off of momentum-based runs, inspired by emotional, social movements. We know how to make something out of nothing, manufacture trends, and toy with perceived value," he wrote.
GameStop reminds us why we fell in love with the outsider kid that was streetwear in the first place — how it meant, and can still mean, about looking beyond clothing and into the wider societal context in which the culture exists. The playing fields are different, but the insurrectionist spirit is the same. It's about the upstart dishing out a bloody nose; the underdog taking on the ruling class it wasn't supposed to because, well, that's how it's always been. When they do, it can end up leading to great things. Bobby puts it more eloquently than I ever could:
Call it a collectivist uprising or people on the Internet dicking around. Either or, watching the dogs of Wall Street squirm is utterly exhilarating.