Reddit says the Buck “Stonks” here

E. Keogh takes us through the GameStop stock affair and how this shows that the one-percent can be rattled.

The recent news about a Reddit page bringing down multiple billion-dollar hedge funds has taken the world by storm. The fact that multiple working-class people managed to invest in a failing company and come out on top was almost unthinkable. For years, the upper classes have told anyone below them if they want to get rich, they should invest in stocks, in crypto, in anything they can. Now that the common people decided they would and came out on top, the rich are angry. 

So how exactly did it all happen? Well, to put it as simply as it was explained to me, hedge funds are created, clients can invest in hedge funds, and this pooled wealth is used to invest in a wide variety of stock. Hedge funds are unregulated which means they are risky to invest in. This also means that hedge funds can do something called “selling short”. This means that investors borrow shares and immediately sell them to other investors, hoping that they can rebuy the shares when the stock falls in price. This is done to companies that are not doing so well. Enter GameStop.

GameStop’s shares were worth around 13 USD up until the 5th of January of this year, going up to 20 USD near the end of the month. GameStop’s fall had been bet on for a long time before this major event on the 12th of January. R/Wallstreetbets had organised an army for taking down the hedge funds when they realised the power they possessed as a collective. Reddit users invested in GameStop stock, and this posed a major problem for the hedge funds. They rely on stock prices falling so that they make back their money and more, but when Redditors started investing, the stock price skyrocketed. The shares that were originally worth around 20 USD wound up with a value of 483 USD. These same hedge funds now had to buy stock in order to give back borrowed shares that had gone up in value, so much so that the stock rose just above 2300% during its peak.

So, is this an example of how we the common people can fight back at wealth inequality? Or was this a once-off? It is definitely possible to do again, but now that the rich have seen it been done, a combination of legislation, more careful planning on the hedge funds parts, and the fact that they will not underestimate the power of the people, it will make it so much more difficult and unlikely. Unlikely does not mean it will not happen, as we have seen the strangers on R/Wallstreetbets are not afraid to take risks when the prize is taking down hedge funds and proving just how much the common people can affect the stock market in such a short period of time. 

The reason this event was able to take place was because of the fact that the people in the subreddit exploited the stock exchange the same way that these rich hedge fund investors did. It was unregulated, risky, and made them a lot of money. It meant that the hedge funds were now billions of dollars in debt. As it was seen very shortly after, trading companies like Robin Hood halted trading altogether on GameStop stock. Other companies followed suit, as massive amounts of people tried to invest. This was the first tell-tale sign that the same event would not be allowed to happen again if it could be avoided. Trading was halted for the supposed reason of SEC safety nets, with many on both sides of the American two party-system calling for companies like Robinhood to resume trading as they only stopped trading to protect the hedge funds and their investors. 

This already made the trading companies allegiances extremely apparent to everyone involved, and the fact that the hedge funds were effectively bailed out meant that they were not only protected by the companies but were also backed by multi-billionaire organisations that offer them a financial net to fall back on should their attempts to short sell fail. The regular people spending parts of their stimulus cheques do not have anything to fall back on. If their investment falls in value, that is it, they have lost their money with no help in sight. No organisation will help, no government assistance. However, the subreddit members, even those that joined their efforts to both to invest in a company that they believed in and cherished as a seller of all things gaming, and to make a big dent in the rich investors’ pockets, proved that the risk was worth it.

So, can this happen again? Absolutely, the people involved came against insurmountable odds and most came out on top. GameStop stock has decreased as the winners want to cash in on their earnings, and legislation is gradually being introduced so that the 'one percent' can stay the one percent. The caps that were present this time around will still be present the next time a group acts, there will probably be more restrictions to save the hassle of having to bail out hedge funds, but as far as I am concerned this is just the start of the working class realising the effect they can have on the pockets of the rich. The question is, will there be another opportunity for all those people to invest again? The price of GameStop stock has dipped down to about 70 USD, and with many anxious investors completely new to trading stocks, many wary Redditors will most like sell the stock they own before it dips too low to yield any profit, or even just to break even for that matter.

The wounds will be felt by the investors who are a part of the hedge funds, and they will be felt as they recuperate their losses for years to come while they pay back their loans and bailouts. This will not be the last time working-class people will demonstrate our ability to seriously mess with how the stock market functions and how the rich take advantage of the stock market.