A month ago, GameStop was a name that, for me, sparked exasperating memories: it was a US store that would give you a few dollars for a barely-used video game that you didn’t want. A few days later you would see it on the shelves at five times the price.
It was, in other words, a quick and dirty way to learn about capitalism.
Now though, GameStop is offering economic lessons of much greater magnitude. As a 21-year-old student I became reacquainted with the video game store of my teenage years through a post on Reddit, the social media site. It said GameStop had an extremely high short interest, was ripe for a short squeeze, and was going to take off.
I was being told it was an investment opportunity. But I did not know the company had gone public and understood nothing about shorts or squeezes.
Still, I had a bit of time on my hands. I’m an English student at university in Chicago, and although I have academic work, it doesn’t fill my days. I live with three friends in a house we rent and generally I spend a lot of my free time hanging out with them. My life is uneventful, like many young lives in the pandemic.
The GameStop post offered something new. I talked about it with my friends, determined that none of us knew what a short squeeze was, and did some research.
I learnt enough to decide to buy $250 of GameStop stock. I’d just been paid for putting up flyers for a church nearby, and I felt the people on Reddit knew what they were talking about, or at least what they said matched my online research.
Since I started university three years ago, I have been investing on Robinhood, the retail investment platform, and making only a very little money — mainly because I have very little to put in.
When I saw that GME (GameStop equity) was skyrocketing, I thought I could net a huge return, in percentage terms at least. On January 25, I bought a few shares. Over the next 24 hours I more than doubled my money, to about $800. Suddenly, the enthusiasm on Reddit made sense. I surrendered to the hype and started looking into other potential short squeezes.
I never believed that GME would hit $1,000. But it was fun to joke about it with my roommates, and the feeling of gaining money was exhilarating. Only 24 hours earlier, I was opening my Robinhood account only when I knew the market had gone up. Now I was opening it every hour.
I knew very few people who were investing (my roommates doubted I would make any money). Instead, I felt I was part of a huge, faceless community whose motives I could only guess at.
Perhaps they are gambling addicts, or else genius investors, possibly held back by a deprived social background.
I like to think they are revolutionaries, working to bring down the hedge funds of Wall Street. Hedge funds, in my view, have no social benefit, a belief widely shared by many university peers. They circulate money among themselves, widening income inequality with the rest of the US and lobbying elected officials.
However, I’m no fool I hope. If a revolution comes, it will be through something much bigger than GameStop. I decided the stock would spike and plummet, as short-squeezed stocks often do, and retail investors would be left holding the bag.
Early on January 26, I sold part of my holding and left the rest in GameStop to see what would happen.
When, a few hours later, Robinhood stopped allowing users to open new positions in GameStop, I understood that it was time to sell up altogether. On a $250 investment, I made a $600 profit.
For a while I was annoyed at what I felt was an injustice — Robinhood blocking small investors while the big funds remained free to invest. But I later discovered that the company’s limits were not part of some Wall Street plot but a rational response by the managers to a lack of capital.
People on Reddit invested in GameStop for many reasons, some clear, some not. For some, like me, it was a quick way to make a little money. For others, again like me, it was a way of raging against the financial elite.
Some traders clearly used the stock as a pump and dump scheme, where they deliberately drove up the price to sell on their shares to new buyers. Others perhaps genuinely saw GameStop as an undervalued company ripe with good prospects. For others still — and perhaps I also belong to this group — it was all a bit of joke. If I have learnt one thing from GameStop, it is that a market mania is unpredictable, exhilarating and random.
