Among the many aftereffects of the GameStop saga earlier this year is an increased interest in Reddit as a source of stock picking advice and investing tips, a recent survey shows.
A survey by Travis Credit Union conducted between February 15 to March 2 among 2,052 Americans revealed that 70% who said they invest look to Reddit for stock tips.
“Today, there’s a lot of positive energy around the stock market as a new generation gets involved through new technology,” said Andy Kerns, Creative Director at Digital Third Coast, which managed the survey for Travis Credit Union.
As for their favorite trading platform, 39% said it was Robinhood, followed by E-Trade at 19%, WeBull at 12%, and Fidelity at 10%.
A majority said they check their accounts daily, while 32% check theirs weekly.
Among all the respondents, 1,275, or 62%, said they have invested only recently. Most said they used what they called “extra spending money,” though one in four surveyed said they invested less than $500.
The rapid rise of retail investors has been a powerful force in the stock market, enabled by a range of factors including commission-free trading, distribution of government stimulus checks, and heightened pandemic boredom as many people continue to work from home.
While more than 57% who were surveyed think the boom in retail trading was “great,” around 10% found it “problematic.”
The retail investing trend hit a fever pitch in January, when an army of retail traders coordinating on Reddit’s Wall Street Bets forum sparred with short-focused hedge funds and pushed their favorite stocks higher.
GameStop shares are likely to get just a limited bump up in volume activity and price from the $1,400 stimulus checks that most Americans are receiving to help them financially cope with the coronavirus crisis, according to Bank of America.
This year’s rush by retail investors into the videogame seller’s shares has resulted in the stock price climbing at high as $348 from nearly $19 at the end of 2020. Much of the fervor around the often-volatile stock has come from retail investors on the Reddit social-media platform, who ramped up a battle against institutional short-sellers in late January.
Over the past two months, Bank of America has analyzed the impact on GameStop shares from non-fundamental factors including the number of conversations on Reddit relating to the stock, trading volumes, and short interest. The factors “have shown a tight relationship and large increases have corresponded to several big surges in GME’s share price,” the firm said.
Then the bank began taking into consideration the $1,400 checks the government starting sending out this month. It analyzed the number of conservations mentioning stimulus, as well as “stimmies” and stimmy”, on online forums then plotted the data against GameStop’s share performance.
In late December and ahead of the round of $600 stimulus payments sent under the Trump administration, “there was indeed a spike in stimulus mentions and this was followed by an even larger increase over the past two weeks,” from March 2 through March 17.
“These spikes also coincided with significant increases in GME’s share price,” wrote the bank in a note led by Curtis Nagle, director of equity research at Bank of America.
But “the impact going forward may be limited given two factors,” the bank said. First, conservations involving stimulus “appear to have peaked” and GameStop shares have declined over the past few days. Secondly, the number of recent conversations including both GameStop and stimulus “is low. GME trading volumes are also steadily declining and short interest is down materially.”
The next event on the radar for GameStop investors is the release of the company’s fourth-quarter earnings after the bell on March 23. “We expect an underwhelming quarter given previously announced holiday sales results that were very disappointing,” said BofA.
It noted that GameStop shares over the past five months “have reacted very positively to a string of announcements” including a digital revenue-sharing arrangement with Microsoft and the appointment of Ryan Cohen to be in charge of a new committee aimed at driving a turnaround plan. Cohen is the cofounder of pet products retailer Chewy and GameStop’s largest individual shareholder.
Bank of America maintained its underperform rating on GameStop shares “on significant earnings risk ahead.”
United Talent Agency did not immediately respond to Insider’s request to confirm the news about Rogozinski. With UTA, Rogozinski may appear in podcasts and speak at a conference in the fall, Bloomberg reported.
Hollywood has been picking up on the GameStop frenzy. MGM, for example, bought the film rights to a proposed book that will cover the saga. And last month, Deadline reported that Netflix is in talks to make a movie about what happened. That’s just two of the nine projects already in the works about GameStop, Bloomberg reported.
Rogozinski founded the Reddit group, r/wallstreetbets, in 2012, while he was working as an IT consultant. But the group only recently became popularized, as its members have helped pave the way for a frenzy in meme stocks, such as GameStop, AMC Entertainment, Blackberry, and Bed Bath & Beyond. In an interview, Rogozinski said seeing the GameStop rally was like watching a trainwreck in real-time.
GameStop stock has fallen nearly 50% from March 10 intraday highs of $348.40, but that hasn’t stopped Reddit traders from holding the stock.
Traders on the popular r/wallstreetbets forum are doubling down their bets on the beleaguered video game retailer despite falling short interest and share prices.
GameStop stock was down as much as 20% on Tuesday before it mounted a recovery. Short interest in the stock has dropped to just 15.77% of its float as of March 16, according to data from Ihor Dusaniwsky of S3 Partners.
Even in face of the bearish news, Reddit traders continued to comment about their “diamond hands” on the GameStop thread of r/wallstreetbets for Tuesday, March 16, referring to investors who hold a stock or cryptocurrency regardless of potential risks, headwinds, or losses. The term is used to represent a group of retail traders’ collective strength in the markets if they act in unison.
A Reddit user going by the name u/darkspherei commented on the March 16 GameStop thread, “upvote if you ain’t selling 💎🙌🦍🚀,” and quickly received nearly 3,000 upvotes.
The online community is attempting to band together once again to “defend” GameStop.
Another commenter on the site going by u/_exordium argued the forum can create a repeat of February’s rise in prices if they band together.
“Don’t forget, in January once it tanked, we all quieted down for a while, but we never f—-‘ left and we never f—-‘ sold. When this place is overrun by FUD and shills, we wait…Hang the f— in there,” u_exordium said.
GameStop shares fell by more than 20% during Tuesday’s session. The move lower came alongside a slump in monthly US retail sales and putting pressure on a widely watched retail exchange-traded fund.
GameStop shares were on track for a second straight loss, though shares staged a recovery in the afternoon following a steep decline in early trading. The stock fell by as much as 22% to an intraday low of $172.35.
The video game seller was down alongside other retail stocks after the Commerce Department said early Tuesday retail sales fell by 3% in February. That result was worse than the 0.5% decline expected in a Bloomberg survey of economists.
GameStop is the top holding in the SPDR S&P Retail ETF with a weighting of about 12.4% as of Monday. The ETF, which had about $855 million in assets under management, on Tuesday fell as much as 3.6% to 90.08 before trimming the loss of 2.3%. Among the ETF’s other holdings, Signet Jewelers fell 1.2%, Kohl’s sagged by 2.5% and Rent-A-Center fell 4.1%. Best Buy, meanwhile, edged up 0.2%.
Sales in the electronics and appliances category in February fell by 1.9% month-over-month and on a seasonally adjusted basis. But analysts largely pointed to poor weather as a key reason that February retail sales declined. The loss also came after an upwardly revised increase in January sales.
The US government last week starting sending stimulus checks of $1,400 to most Americans as part of its coronavirus-relief package. That money “will lift disposable income by roughly 25% month-over-month in March, creating a massive tailwind for consumer demand,” Aneta Markowska, chief economist at Jefferies, in a note Tuesday.
Other analysts have said GameStop should benefit from customers having extra funds for discretionary items.
GameStop, AMC Entertainment, and other so-called meme stocks gained on Monday as retail investors looked to fuel new rallies.
The video-game retailer rose as much as 10.1%. AMC climbed 13.7%. BlackBerry and Express swung 5.2% and 7.4% higher, respectively.
The stocks have traded with elevated volatility in recent sessions as day traders congregating online try to repeat the surges seen at the start of the year. Recent posts on r/wallstreetbets and other trading forums praising the upswing garnered thousands of comments and votes of approval. And while the companies trade well below their January highs, they still boast huge year-to-date gains.
The gains follow broad selling across the Reddit favorites. The stocks tumbled in Friday trading after rising the session prior, underscoring the back-and-forth action seen since January’s extraordinary rallies.
Retail investors looking to lift prices again face a tougher challenge. The Reddit-savvy traders had the element of surprise when they first bid up shares, and their ability to shock the market establishment quickly publicized the trade. The stocks’ unusually high short interest also exacerbated the rallies as bearish investors had to buy shares to cover their souring bets.
Separately, regulators are looking into the January price action to determine its legality. While the Reddit crowd has repeatedly indicated they simply “like the stock,” those warier of the sudden climbs suggest the online communication could qualify as market manipulation.
A new report suggests bots also played a significant role in driving hype around the trade. Fake accounts on major social media platforms amplified calls to buy and hold shares of GameStop and other relevant stocks, Reuters reported, citing analysis by cybersecurity company PiiQ Media. Still, it’s unclear how much of an impact the bots had on the rallies.
Lawmakers have already taken steps to better understand the market phenomenon. The House Financial Services Committee held a hearing in February on the matter, and the Senate Banking Committee is poised to do so.
GameStop closed at $101.74 per share on Friday, up about 428% year-to-date.
On Wall Street, there is nothing like a reminder from the old timers that everything we’re doing has been done before. In times like this one – when the market is awash with cash, stocks go from kissing all times highs to careening downward, and retail traders have aggressively joined the fray – this reminder is often a warning that most hot new investment crazes are just old-timey bubbles in disguise.
And so it was last week, when billionaire Charlie Munger – the nonagenarian business partner to legendary investor Warren Buffett – took the mic at the Daily Journal annual meeting. He blasted Bitcoin as useless, calling it “the pursuit of the uneatable by the unspeakable.” He accused Robinhood of leading its users into “speculative orgies.” And said that Special Purpose Acquisition Vehicles (SPACs) – which allow investors to raise money to create a publicly traded entity in hopes that it will buy a private company within two years – are the indication of an “irritating bubble.”
To Munger all of these new fangled instruments designed to separate you from your money are part of the bull market joke. Some people are in on it, and some people are not. That’s what happens when things get silly in finance. All kinds of products can be dreamt up when there’s lots of money sloshing around, but not all of them can ultimately deliver.
Or as Munger put it, “the investment banking profession will sell s–t for as long as s–t can be sold.”
And it’s not just the investment bankers telling stories now. Now it’s also corporate CEOs who’ve decided to become crypto influencers, anonymous people on Reddit, that guy from Barstool Sports, and anyone – from Colin Kaepernick to former Goldman Sachs COO and Trump administration official Gary Cohn – who knows someone at a hedge fund.
All of these people are participating in the story that sells the bubble instruments Munger was complaining about.
I promise you that most people on Wall Street are in on the joke. But they are trained to play whatever cards the market deals them. Sometimes that means the art of stock picking is complicated balance of numbers over time – like a job Danny Ocean would pull robbing a Las Vegas casino.
Other times, like now, trading stocks (and some other new stuff) is more of a smash and grab job – like Bonnie and Clyde running into a bank, grabbing the cash, and escaping into their still-running getaway car parked in front.
Consider all the hubbub over GameStop and the power of retail traders betting as one. Will Robinhood revolutionize trading for the masses and turn everyone into an investor? Probably not. Once the pandemic ends people will have other things to spend their money on like restaurants and travel. And I for one am waiting for all the stories about people getting fired for trading on Robinhood all day at work once we have to go back to the office.
But will every hedge fund worth its salt be checking the Wall Street Bets subreddit for as long as this retail trading trend goes on? You bet. They’ll be trading on the information they glean there and probably impart some wisdom of their own too. It’s all fun and games until somebody loses a savings.
Every joke is highly dependent on the setup story, and on Wall Street it’s no different. Before a bubble bursts, it has to be blown up. We are watching that hype machine in real time.
The market has already launched 175 SPACs this year, each of them being their own mini-story about the future. These vehicles raise money so that a public entity can merge with a private company, allowing that private company to circumvent the IPO process (you know, that pesky process through which we discovered the WeWork was WeWorthless).
Everyone has a SPAC now because you would be crazy not to. Research indicates that – mirroring the life cycle of any bubble – they are far more profitable in the fundraising-honeymoon-anything-is-possible beginning phase than they are when all is said and done. A Harvard study found that while most SPACs “issue shares for roughly $10…by the time of the merger the median SPAC holds cash of just $6.67 per share.”
Of course, usually the funds that raised the money have peaced out by then.
When it comes to Bitcoin, sometimes the story is that eventually we’ll all have some Bitcoin. Never mind that Treasury Secretary Janet Yellen explained why that doesn’t make sense at the DealBook conference last week. Mining Bitcoin leaves a massive carbon footprint and transactions are incredibly slow.
“It is a highly speculative asset and you know I think people should be aware it can be extremely volatile and I do worry about potential losses that investors can suffer,” Yellen said.
Sometimes Bitcoin’s story is that, since governments can’t be trusted and the world is following apart, Bitcoin will eventually be a store of value like gold. This has some companies LARPing central banks and adding Bitcoin to their balance sheets. So far it has merely added more volatility for these companies’ stocks, worrying investors that companies like Tesla have hitched their wagons to a time bomb.
No matter, the CEO of MicroStrategy – another company that has bought into the craze – said he’s considering borrowing in order to buy more Bitcoin.
Ultimately, though, what most people on Wall Street will tell you candidly is that Bitcoin is is a tool for speculation. Of course, the Wall Streeters who are speculating on Bitcoin and other currencies love all these tall tales about its future. The stories ensure that more people who are not in on the joke hand over their money, so they’ll keep telling them.
The only laugh that matters is the last one
Everything I’m saying is really annoying to everyone making money in this market. Fine. After hearing that Munger said that it’s “stupid” to have a culture that encourages as much gambling in stocks. Robinhood’s spokesperson Jacqueline Ortiz Ramsay called his view “disappointing and elitist.”
Then she went all in on the story Robinhood’s been selling. It’s a really good one, you may have heard it during the GameStop Congressional hearing earlier this month. She said that the platform is empowering a “new generation of investors” and people who don’t have access to “generational wealth.” Munger, she suggested, is behind a great “cultural shift” of our times. How can you argue with that?
You don’t. Munger’s basic response to all that was ‘look man I get it, we all gotta eat.’
When everyone is making money, it’s easy to laugh away a warning from an cranky billionaire who was of legal drinking age when the Allies bombed Dresden. Wall Street goes into hype beast mode about individual stocks all the time, it’s just that right now with everyone at home and logged into their trading accounts, and TikTok kids making sea shanties about doge coin this has all gotten out of hand. A lot of these new people are not in on the joke, and they will not be laughing when it’s all over.
In a post entitled, “LWSB: Lucid Wall Street Bets, all longs – CCIV heavily shorted by coordinated groups and manipulators. Why can’t we have a LWSB and defend. Are you in?” that garnered nearly 9,000 upvotes, the Redditor said retail traders should “keep buying” CCIV stock until it hits $300 per share.
The post echoed popular “David vs. Goliath” sentiments from past Wall Street Bets discussions arguing traders should join forces to “defend” CCIV from institutional short-sellers and bearish options traders. The post called CCIV a “heavily-shorted” stock.
However, according to data from The Wall Street Journal, short interest in CCIV was just 2.19% in February. Although the figure has risen over the past week. By comparison, Reddit darling GameStop has short interest of around 30%.
With a lower short interest, it’s unlikely a short squeeze could occur, meaning that a GameStop-style rally in the share price is a long shot. Not only that, but hedge funds also own a considerable portion of CCIV shares.
In fact, the three top hedge fund owners of CCIV – Millennium Management, Karpus Management, and Alberta Investment Management – own over $400 million worth of shares in the SPAC, and institutional ownership in the company is over 55%, according to data from Nasdaq.
That didn’t stop Redditors from making their case.
“It takes time to build momentum. GME did not happen in one day. Be Patience. Shorts/puts will try to spoil momentum, but we together hold strong and move step by step. we will start first day war tomorrow. Sleep well Warriors,” u/MadMax212121 said.
Additionally, the traders have started their own forum dedicated specifically to Lucid Motors. It’s called Lucid Wall Street Bets or r/LWSB and currently has around 5,000 members.
While that’s a far cry from the nearly 10 million users on the main Wall Street Bets forum, the Lucid traders are gaining momentum.
Attempts to crowdsource funding to “defend” certain stocks from falling share prices has become a common occurrence on Reddit. It’s a phenomenon that has come despite the Securities and Exchange Commission saying they are looking into possible misinformation on social media sites like Reddit.
Shares of CCIV recovered as much as 17% on Friday before paring gains.
BlackBerry and Nokia rallied on Thursday as the revival of Reddit-trader momentum lifted a handful of so-called meme stocks.
BlackBerry rose as much as 7.4%, while Nokia gained 7.2% at intraday highs. Both stocks quickly pared gains through the morning, with BlackBerry turning slightly negative soon after the open.
The nostalgic telecom names were among the several stocks to surge throughout January as day traders uniting in forums like r/wallstreetbets piled into highly shorted companies. The rally, best known for sending GameStop shares surging, died down in February as momentum shifted and retail investors rapidly exited their positions.
The final minutes of Wednesday’s trading session signaled the day-trader crowd is ready for round two. GameStop spiked 104% higher into the close as casual investors cheered the ouster of its chief financial officer, Jim Bell, as part of a company overhaul. The bullishness quickly spilled over into other Reddit favorites, including AMC, Koss, Nokia, and BlackBerry.
Posts on Wall Street Bets and other online forums suggest the upswing has some staying power. A post predicting “the Mother of All Short Squeezes” for GameStop stock sat at the top of Reddit’s “Popular” page at 8:30 a.m. ET, exposing the website’s users to the latest phase of the Reddit-trader saga. Hugely popular posts likely contributed to the January meme-stock rally, and a revival of such online activity could fuel similar inflows.
However, the day traders are no longer operating from the shadows. The GameStop surge drew scrutiny from Wall Street, regulators, and lawmakers, sparking new debate over protections for retail investors and their power in the market.
The House Financial Services Committee held a hearing on the phenomenon last week that included testimony from Robinhood CEO Vlad Tenev, Citadel CEO Ken Griffin, and popular retail investor Keith Gill, among others. The Senate Banking Committee is expected to hold its own hearings in the near future.
BlackBerry closed at $11.32 on Wednesday, up about 70% year-to-date.
GameStop’s share price more than doubled in the final 30 minutes of trading on Wednesday as the buying frenzy that sent the stock skyrocketing in late January found renewed life.
The stock closed 104% higher, at $91.71, following a period in which trading was halted multiple times because of volatility.
GameStop was in focus following the news on Tuesday of Jim Bell’s resignation as the chief financial officer. Sources told Insider on Wednesday that Bell was forced to resign by the company’s board as part of a push by the activist investor and new board member Ryan Cohen to reshape the ailing retailer.
Wednesday’s wild final 30 minutes were reminiscent of the Reddit-driven buying spree that engulfed the stock in late January, pushing it to a dizzying all-time high of $483, up 2,464% year-to-date.