AMC, GameStop stock swings: Reddit's 'insane' campaign becoming a 'train wreck'
Investors congregating on social media are pushing GameStop's stock value up, to spite Wall Street short sellers. But experts say it can't last.
GameStop is one of those stores nearly every gamer has a story about. Today's young adults spent their childhoods in the company's stores, buying and selling consoles and video games. Now some of those people have made a fortune
buying the company's stock and cheerleading their friends on
Reddit to
buy it too. All this activity between social media investors pushing the price up, and Wall Street betting the price down, has caused the stock to swing wildly. Jaime Rogozinski,
the apparent founder of the Reddit community at the heart of all this, told the Wall Street Journal it's like "a train wreck happening in real time."
On Thursday alone, GameSpot's stock hit all-time highs of $492.02 per share, only to drop by more than half a minute later. On Friday morning, it jumped up another 75% to $341.
Though GameStop itself hasn't fundamentally changed much in the past month, its stock has shot up as much as 2,752% -- that's not a typo -- since the beginning of the year. This dynamic's led Wall Street investors who bet against the company's future to
lose billions of dollars, and the excitement is
driving the hype even further.
Over the past week, the financial world watched in shock as GameStop stock rose to unthinkable levels. Even
Elon Musk tweeted about it, pointing his 43 million followers to a link of the Reddit community investing in GameStop, called
r/WallStreetBets.
By the close of regular trading Wednesday afternoon, the stock was $347.51 per share, up from from historic lows of around $3.30 per share in the summer of 2019. And then in after-hours trading, it dropped by more than 37%, only to rise again. Thursday saw even more dramatic moves, with the stock jumping up to $492.02 before dropping nearly 60% to close at $197.44. Then, in after-hours trading, it rose back up to $311.99.
Meanwhile, stock market trading app
Robinhood appeared to stop GameStop purchasing for part of the day, while other companies imposed rules to limit some trades as well.
"We're seeing a phenomenon that I have never seen," Jim Cramer, a Wall Street commentator on CNBC and a former hedge fund manager,
said during a segment Monday. And GameStop could be just the start. "It's insane."
This may seem like an oddball story about Wall Street investors being overrun by excited social media users. For some, it's been fun to watch those investors get taken to the cleaners by a bunch of people posting rocket emojis, saying GameStop shares will go "
to the moon."
But for some on Wall Street, it's the latest sign of how social media can upend everyday life. Twitter has changed the worlds of news and politics. YouTube and Instagram have transformed the fashion, beauty and entertainment industries. Now Reddit is taking on Wall Street.
These worlds have overlapped as well. Fans of Korean pop groups, known as K-pop stans, post floods of tweets about their favorite stars to
overwhelm racist hashtags on Twitter. And TikTokers banded together in attempts to
confuse President Donald Trump's reelection campaign.
Now emboldened Reddit communities are talking about taking on other companies that Wall Street is broadly betting against. The Reddit crowd is already
attempting to push up BlackBerry, the once-popular handset maker that now focuses primarily on selling business software. And Redditors are also targeting the struggling movie chain AMC, pushing its stock from hovering around $2 per share to more than $8 in after-hours trading. By Wednesday afternoon it closed at $19.90 per share before dropping to $12.75. On Thursday, it fell even further, to $8.63 per share.
The Reddit community's actions have had such an impact that TD Ameritrade took the extraordinary step earlier this week to
limit share trading on Game Stop and AMC stocks, "out of an abundance of caution amid unprecedented market conditions." Nasdaq as well warned that it will halt trading on stocks
it thinks are being manipulated by social media.
Meantime, traffic to the Reddit community at the center of the drama, WallStreetBets, is breaking records. WallStreetBets counted
73 million page views for its discussion boards on Tuesday, according to a report by Mashable. Over the past week, it hit about 700 million page views. Reddit is already the 46th most popular site on the web, notching more than 78 million unique visitors in December,
according to comScore. And on Wednesday, the Reddit's mobile app tallied its
biggest single day of downloads, industry watcher Apptopia said.
But when the memes stop and the excitement goes away, GameStop will go back to being that struggling video game retailer at a time when gaming is increasingly moving toward streaming and the idea of stepping into a physical store is still a nerve-wracking prospect during a
pandemic. At that point, stock analysts say, whoever's left holding shares will see their value evaporate.
"This is unnatural, insane and dangerous," Michael Burry, a prominent GameStop investor and one of the subjects of the book and movie
The Big Short, wrote in a now-deleted tweet. His roughly $17 million investment in the company has ballooned to $250 million as of Tuesday,
Markets Insider reported.
Tl ; DR
Shut it down