When GameStop Didn’t Drop #104

Deepnews Digest #104

When GameStop Didn’t Drop

Editor: Christopher Brennan
While a certain section of media outlets is always covering the stock market, this week one story, blending finance, technology, and society, exploded into the mainstream public consciousness. So-called “meme stocks” such as GameStop were spurred upwards by individual traders who used Reddit to take aim against the positions of major hedge funds. It’s the sort of story, with competing narratives of brave pranksters pushing back against the powerful vs. young whippersnappers who might get themselves hurt, that is ripe for a Digest. Below are articles on meme stocks, the trading platform Robinhood and more.

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Published every Thursday

Forbes

Founder Of WallStreetBets Discusses Why The Group Unleashed Chaos On Gamestop—And Why He’s (Really) Exiled From Reddit

From his apartment in Mexico City, Jaime Rogozinski has spent some time over the last couple days contemplating an uncomfortable thought: whether he’s become a latter-day Dr. Frankenstein, his out-of-control creation being the stock-trading Reddit community known as WallStreetBets that has whipsawed financial markets and executed a multi-billion-dollar short squeeze.

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Quartz

A Reddit user on what it’s like to be part of “the mother of all short squeezes”

In mid-November, Fage138 bought shares of GameStop, a staple mall tenant that sells electronics and gaming merchandise. The shares cost $13 a unit, and he bought around 50 of them. Then, over the next two months, as he bought a couple of hundred more, he watched the stock price blow up, setting markets afire with controversy and inducing one of the most dramatic short-squeezes in history.

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Editor’s Note:

The emergence of the Reddit user stock moves into the mainstream this week has sent many outlets looking to find out who exactly are these traders. Several of the pieces on this Digest, such as this one, the piece from Forbes above and the one from Reuters below, attempt to answer that question. – Christopher Brennan, Editor

The Verge

Robinhood denies claims that it sold GameStop shares out from under its traders

No, Robinhood tells The Verge, it didn’t sell off full shares of GameStop, AMC, and other buzzy stocks without permission from its traders. That contradicts the stories of twelve people who spoke with The Verge, saying that the app unexpectedly sold off their holdings in some of these companies.

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Reuters

Famed GameStop bull ‘Roaring Kitty’ is a Massachusetts financial advisor

WASHINGTON – A YouTube streamer who helped drive a surge in the shares of GameStop Corp is a 34-year-old financial advisor from Massachusetts and until recently worked for insurance giant MassMutual, public records and social media posts show.

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Detroit News

GameStop stock market surge captures attention, enriches Michigan billionaire Donald Foss

The dizzying, unlikely ascent of shares in brick-and-mortar video game retailer GameStop Corp. this week has set Wall Street and social media abuzz — and made one Michigan billionaire considerably wealthier.

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Bloomberg

GameStop Staff Making $11 an Hour Miss Out on Rally’s Spoils

In a Reddit post last week, a day trader who helped push GameStop Corp. shares to record highs said he stopped by his local store to hand out $100 bills to employees as a thank-you. He encouraged other traders who’d seen a windfall to do the same. “They are a part of the reason we are up so much,” the trader posted, attracting 442 comments.

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The Guardian

Anarchy, in-jokes and trolling: the GameStop fiasco is 4chan-think in action | Dan Dixon

During my late teens, around 2005, a group of high school friends and I (boys, nerds; mean together, meek apart) discovered the website 4chan and it occupied us for a couple of years. Its appeals: anarchy, in-jokes, and abrogation of responsibility.

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The Daily Beast

He Joined the GameStop Uprising to Screw the Big Guys — and Save His Dog’s Life

On Sunday night, Patrick, a 33-year-old from Texas, noticed his dog was limping. Concerned, he took him to the vet Monday. He got bad news: pay $4,000 for surgery, which he didn’t have, or put his dog down.

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The Independent (UK)

The GameStop story is the digital equivalent of the Peasants’ Revolt | James Moore

Such power is intoxicating and the battle has spread beyond GameStop. A number of other companies targeted by shorts, including cinema operator AMC and British rival Cineworld, have seen their share prices bumped up in recent days.

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Sydney Morning Herald

Top Aussie fund sold GameStop before market frenzy sent shares into the stratosphere

One of Australia’s most revered investment houses sold a multi-million dollar position in the struggling US videogame retailer at the center of an international sharemarket frenzy this week, missing out on extraordinary gains triggered by a day trader revolt.

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Editor’s Note:

When a stock starts soaring, there are of course those who miss out. This piece from Australia is one of the several articles this week, such as one from Detroit on a local billionaire and one in Texas covering the local industry, to take a local angle, and looks at Paradice Investments – Christopher Brennan, Editor

Wall Street Journal ($)

Trading Surge Strains Online Brokerages

In recent days, clients of Fidelity Investments, E*Trade Financial Corp., Charles Schwab Corp. and Vanguard Group have encountered brief delays executing trades or temporarily lost access to vital account information. The service disruptions came during a period of frenetic trading, largely driven by individual investors.

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The Economist

Day traders have sent GameStop’s share price sky-high

For most of 2020 shares in GameStop, a struggling seller of video games with more than 4,000 shops across America, fetched a few dollars apiece. The stock languished as the pandemic shuttered malls. But in August Ryan Cohen, the former boss of Chewy, an online pet-food store, started amassing a large stake. In November he wrote an animated letter to the board, urging them to review GameStop’s business and invest in e-commerce to boost online sales. Investors seemed to like his plan: by January 11th, when he took a seat on GameStop’s board, his 12.7% stake had doubled in value. The shares were worth around $20.

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American Prospect

The GameStop Craziness Pulls Back the Curtain on the Stock Market

About a decade ago, we first heard the phrase “Occupy Wall Street,” which referred to groups of young people, fed up with a rigged economic system, taking over a small park in Lower Manhattan and demanding an economy that works for everyone and not just the one percent. It had a short shelf life, as police, in paramilitary mode, dismantled the encampments. And life went on.

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New York Times

‘Dumb money’ is on GameStop, and it’s beating Wall Street at its own game

A real estate salesman in Valparaiso, Indiana. A former line cook from the Bronx. An evangelical pastor and his wife in Huntington Beach, California. A high school student in the Milwaukee suburbs.

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Reuters

Inspired by GameStop, Malaysian retail investors look to prop up medical glove shares

Malaysian retail investors are looking to buy stocks of medical glove makers to drive up their share prices and squeeze out short sellers, drawing inspiration from the recent rally at U.S. firm GameStop Corp .

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Rolling Stone

Ja Rule, a Robinhood User Since 2014, Calls GameStop an ‘Uprising’

Unfettered froth and chaos hit Wall Street this week. What started as a Reddit group of retail investors pitching money into “meme stocks” like GameStop quickly snowballed into a David-and-Goliath story involving multibillion-dollar hedge funds, government agencies, and even U.S. senators. On Thursday, investment app Robinhood abruptly delisted stocks with high volatility, preventing millions of people from trading in the likes of GameStop and AMC — and prompting rapper Ja Rule to wade into the conversation.

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Barry Ritholtz

Late Cycle Bubblicious? – The Big Picture

I wrote a column yesterday (out tomorrow) on how to manage your investments when it is late in the market cycle. As these things so often go, when writing 800ish words to a specific topic, lots of other ideas and distractions come along.

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Editor’s Note:

While many people have been learning a lot about the stock market this week, there are also those who have been following it for a very long time. Here our algorithm highlighted a piece from Barry Ritholtz looking back to the dotcom bubble. – Christopher Brennan, Editor

The Times (UK) ($)

Tyro traders playing game with high stakes

Oscar, a 26-year-old Londoner, is not untypical of many novice traders drawn to buying shares in Gamestop, the company at the centre of the phenomenon transfixing financial markets. “I’ve not bought shares or done anything like this before,” says the civil servant, who asks us not to publish his surname.

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Dallas Morning News

American Airlines stock surges as retail investors continue war on short sellers

American Airlines stock surged more than 50% in pre-market trading at one point Thursday after the company reported a $2.2 billion loss for the fourth quarter.

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The Globe and Mail

A sure sign of an overheated stock market – people are trading from the bathroom

But when they trade stocks from the john, it’s a matter of interest to all investors because it suggests an overheated, speculative market headed toward a reckoning that will hurt young investors the most.

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NBC

Redditors took on hedge funds over GameStop and AMC Theatres stock and won. So what now?

Wall Street giants are calling foul after having been beaten at their own game by a bunch of guys on the internet. It’s hard not to cheer.

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TechCrunch

Could Meme Stocks Like GameStop Stop Bitcoin’s Rise?

Cryptocurrencies, more so than most other things, are only valuable because of a shared agreement that they are valuable. Their value is a product of digital handshakes over millions of transactions firming up that consensus. For bitcoin, the trust that it has worth has turned more valuable in the past several months; it’s been on a tear.

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Editor’s Note:

Before everyone was talking about GameStop, everyone was talking about Bitcoin. This piece looks at what is to become of the cryptocurrency now that the hype is elsewhere. – Christopher Brennan, Editor

Popular Info

The merry adventures of Robinhood

Hedge fund manager Gabe Plotkin is ridiculously wealthy. In November, Plotkin purchased a $32 million mansion in Miami with “nine bedrooms, twelve full bathrooms and four half bathrooms.” To preserve his privacy, he also paid $12 million for the house next door. Plotkin also recently bought a “large chunk” of the Charlotte Hornets.

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NY Daily News

Steve Cohen’s Enormous GameStop Losses Are His Own Fault

The team hasn’t splurged on any major free agents or extended any of its own young talent. They had to fire the GM for being outed as a serial sexual harasser just a month after he was hired. And, most alarmingly for the Mets’ competitive fortunes, Cohen has quickly lost a ton of money on an ill-advised investment. Point72, the $19 billion hedge fund owned and operated by Steve Cohen, is down 15% this year, according to the New York Times.

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Barron’s

Reversion to the Meme: GameStop, WallStreetBets, and the New Rules for Stock Trading

I’m in a hurry to study the classics: Grumpy Cat, Chuck Norris facts, condescending Wonka. Internet memes are the new keys to stock valuation, it turns out, and I’m woefully underversed.

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