In January, a large number of members of a Reddit community called wallstreetbets bought shares in GameStop, an American gaming retailer that wasn’t doing all that well in the midst of the pandemic. Because of this, a large number of hedge funds shorted the company. But when the Reddit community bought a large number of shares, this sent the stock price of GameStop soaring and led to huge losses for the hedge funds involved.
So what?
The implications of this are still unclear. For many in the Reddit community, it was a joke. But there were other users who called the move revenge against the big companies they saw as responsible for the 2008 crash. One thing is certain – the move demonstrated the potential power of online communities to disrupt the market. As the noise around the unfairness of today’s economic model grows, could we see more such market disruptions by the masses?
One aspect that emerged in some of the media coverage is just how sophisticated a few of these Redditors were in their analysis of the structure and functioning of equity markets. Clearly, some of these anonymous contributors were professional traders.
While on the one hand, the short-squeeze was organised entirely transparently, in full view of the public and regulators. On the other we know very little about these contributors and their motivations. Were they trying to manipulate the WSB community for their own personal gain, or were they using the tools of financial engineering to undermine the very system that produced them?
To me, this question signals the potential for a new form of direct action led by financial professionals disenchanted by the effects of our financialised form of modern Capitalism.