GameStop, the brick-and-mortar video game retailer, has seen better days. At its peak, the retailer enjoyed massive growth and was the number one outlet for consumers purchasing gaming hardware and video games. But amid the rise of digital gaming services like Xbox Live and Steam, GameStop neared financial collapse after its stock value dropped from $16 per share to under $4 in 2019.
The company’s stock remained below $5 per share until recent days, when it soared by over 8,000 per cent compared to just a few months ago. Business Insider reports that “between January 20 and January 26, GameStop’s stock value leaped from just over $35 per share to north of $140 per share,” and “by January 27, it hit new highs of over $325 per share.”
The shares rose 157 per cent before the market opened on Wednesday, meaning that the retailer’s market value has risen more than 20 times this month to around $26 billion dollars, larger than more than a third of the companies listed in the S&P 500 stock market index.
GameStop’s market value has little to do with its future prospects as a retailer, or even the video game industry. Instead, its stocks surged in price because of efforts by a Reddit community called r/wallstreetbets, which is “dedicated to playing the stock market.”
The group of amateur investors used Robinhood, an investing app, to manipulate the prices of GameStop, doing so to counter efforts by Wall Street firms intent on shorting the stock.
As reported by Yahoo Finance, the Reddit users purchased stock originally priced at under $5 a few weeks ago with the plan to cause it to increase in value, and there are “no signs of that collective action stopping anytime soon.” Their efforts were propelled by Tesla CEO Elon Musk, who linked to the Reddit thread, presumably encouraging his 43.2 million Twitter followers to join in on the collective action.
Wedbush Securities managing director Michael Pachter called the GameStop stock value “just a cult phenomenon,” and argued that the Redditors “don’t currently have the earnings power to support a price this high.” Michael Burry, best known for his role in predicting the subprime mortgage crisis in the 2000s, described it as “unnatural, insane and dangerous,” stating that the efforts have gotten out of hand.
The efforts from the amateur investors have been celebrated on social media as the common man rising up against the elites on Wall Street, who have thus far profited off GameStop’s demise.
Wall Street appears to have supporters in the mainstream media who have decried the collective action as stemming from racists and neo-Nazis.
“i can report from the telegram channels that the nazis appear to be trading gamestop and amc as well,” wrote Vice journalist Ali Breland.
The Hill reporter Nathaniel Weixel insinuated that the collective action might be driven by the same forces behind the riot on Capitol Hill in early January, replying, “what is your sense of the overlap between the r/WSB people and the nazis on telegram and elsewhere who stormed the capitol”.