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It is a story of David and Goliath in the modern era. A dishonest group of individual investors come together in an online community and decide to take down the hedge funds that profit from corporate bankruptcy. The battle rages around the video game seller GameStop (NYSE: GME), which has shown three consecutive years of declining revenue and earnings per share.
Hedge funds Melvin Capital, Citron Research and others had bet on the retailer to lose value. But traders in the Reddit r / WallStreetBets community had other plans. They intentionally set off a barrage of trading activity to cause the price of GME shares to rise inexplicably, forcing both funds to take huge losses and close their short positions.
Image source: Getty Images.
As if that wasn’t dramatic enough, this story also has a number of celebrity appearances – well-known investors and personalities have taken to Twitter to add their own full-color commentary. Here’s what seven of them have to say.
Cuban Mark
I have to say I like to love what’s going on #wallstreetbets. All these years of high frequency traders ahead of retail traders, maintaining the speed and density of information and retailing gives the little guy an edge. Even my 11 year old traded with them and won $
– Mark Cuban (@mcuban) January 28, 2021
High Frequency Trading (HFT) uses complex algorithms to analyze data and execute trade orders very quickly. This is controversial because HFT traders use the speed of rules-based decision making to generate profits, often to the detriment of individual investors who are slower to process information and execute trades.
Like Cuban, HFT gives institutional traders a clear advantage over the little guy. And that’s exactly what motivated the WallStreetBets community to oppose a system that feels rigged against them.
Elon musk
you can’t sell houses that you don’t own
you can’t sell cars you don’t own
But
you * can * sell stocks you don’t own !?
this is bs – short circuit is a scam
legal only for residual reasons– Elon Musk (@elonmusk) January 28, 2021
Musk is obviously not a fan of short sellers. But there is history here. His own company You’re here has had his fair share of run-ins with short sellers – which prompted Musk to pitch the idea of privatizing Tesla in 2018.
Morgan housel
The Gamestop trick is a reminder that investing is not the study of finance. It’s the study of how people behave with money, and sometimes those behaviors are amazing.
– Morgan Housel (@morganhousel) January 26, 2021
As WallStreetBets has shown us, despite the technology that drives the financial markets, investing remains a very human activity.
Tyler winklevoss
Robinhood was never what it claimed to be. He built his business on selling Wall Street Bets order flow to the Citadel hedge fund. At the moment of truth, we learned which customer he cares about the most.
– Tyler Winklevoss (@tyler) January 28, 2021
Winklevoss refers to Robinhood’s decision to temporarily halt purchases of GME shares, while allowing liquidations. Incidentally, Melvin Capital is owned by Citadel, LLC, a company responsible for 40% of Robinhood’s revenue. It looks like Robinhood is not the trading platform for the people after all.
Chamath Palihapitiya
In times of uncertainty, when it takes courage and strength, you find out who the real corporate bastards are.
– Chamath Palihapitiya (@chamath) January 28, 2021
Palihapitiya also calls out Robinhood for failing to live out his own mission when he had the chance.
Kevin O’Leary
Gone are the old days when a hedge fund manager could quietly sell a stock, then post negative research and talk about it in the media. They now run the risk of the power of the crowd turning on them and clenching their heads like a teenage button. I’m good with it!
– Kevin O’Leary aka Mr. Wonderful (@kevinolearytv) January 28, 2021
Even Mr. Wonderful is in favor of putting checks and balances in place to avoid market manipulation. Even better if those checks and balances are motivated by an angry crowd of everyday investors.
Pat McAfee
So what happens next ?? They freeze everyone’s accounts. Trials happen. They never end. #WallStreetBets is hiding … Dogecoin goes to the moon .. the world continues ??
– Pat McAfee (@PatMcAfeeShow) January 29, 2021
McAfee is known for his professional sports career and commentary rather than his investment prowess, but he asks an important question. Now that the little guys have rocked the Wall Street institution, where do we go from here?
Lawmakers Elizabeth Warren and Paul Gosar are calling for investigations into Robinhood’s actions and users are already filing class actions against the trading app. But short sales, HFT and WallStreetBets will continue. The rogue trader group has already moved on to its next targets, namely AMC, Nokia, and Blackberry.
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