Unraveling the GameStop saga
A conflict among hedge funds, self-described losers, and the culture at large
It’s almost unheard of for a major studio to buy film rights to an unfinished book about a financial event that is still playing out. Yet MGM did exactly that on Friday night when the company beat out other studios to lock down the rights to a proposed title by bestselling author Ben Mezrich on the GameStop stock feud.
The working title of the book, The Anti-Social Network, plays off the name of another film based on Mezrich’s work, The Social Network, which told how Mark Zuckerberg and his Harvard University buddies founded Facebook. But “anti-social network” also refers to a raunchy, rowdy bunch of amateur investors who organized the Wall Street equivalent of a populist uprising. Hollywood clearly believes the public is interested in this brass knuckle Wall Street brawl: Before Monday was out, Netflix had also set down its marker, planning a competing screen version of the GameStop fight with Mark Boal, the Oscar-winning screenwriter behind The Hurt Locker and Zero Dark Thirty. The streaming giant has even reportedly already cast one of the lead roles.
The GameStop saga pits an internet collective of “basement-dwelling” (their term) day traders against wealthy hedge fund executives, but which one is the hero and which is the villain is subject to interpretation. Each group has members from the political left and right. U.S. Rep. Alexandria Ocasio Cortez, D-N.Y., and Sen. Ted Cruz, R-Texas, have defended the day traders. Analysts have compared them not only to supporters of former President Donald Trump but also to the radical liberals of the past decade’s Occupy Wall Street movement. The conflict has become an avatar for bigger, more complex societal battles.
The story began on Reddit, a website that hosts internet forums where people with similar interests share ideas and opinions in a relatively unfiltered environment. A group of “Redditors” in an investment forum called Wall Street Bets noticed that hedge funds were driving down the already low price of GameStop’s stock by betting it would drop further. The forum users saw an opening to execute a torpedo maneuver known as a short squeeze. By banding together, they could push GameStop’s price up rather than down, forcing the short sellers to buy back into the stock at exponentially increasing prices. It worked—so far, the Redditors have managed to extract an estimated $70 billion dollars from the top of the finance industry’s food chain.
“It’s as if a bunch of couch potatoes watching a Los Angeles Lakers basketball game on TV belted down their beer and nachos, barged onto the court—and proceeded to block LeBron James’s shots,” columnist Jason Zwieg wrote in The Wall Street Journal.
Nostalgia seems to have influenced the Redditors’ decision to pull a short squeeze on GameStop as opposed to other companies. At the height of its popularity in the 2000s, the brick-and-mortar video game retailer likely sold many of the Redditors’ their first PlayStations and Xboxes. A widely shared image, or meme, on Reddit shows a cartoon depicting the members of the Wall Street Bets forum as young Teenage Mutant Ninja Turtles being led by their sensei, a giant rat named Splinter who represents GameStop. In the next panel, an adult turtle protectively wraps his arm around an aged and hunched Splinter. The inference is clear—GameStop gave the Redditors’ their past, so they will give it a future by protecting it from the circling sharks of high finance. Even as the stock price dropped on Wednesday, many Wall Street Bets members said they would not sell.
That could explain why, even beyond the high drama and outsized personalities involved, the entertainment industry was so quick to invest in the Redditors’ story. It’s a personal fight for Tinsel Town, as well.
The Redditors also collaborated to boost the price of AMC Entertainment, the nation’s largest movie theater chain. Hedge funds targeted AMC for short selling after it struggled to stay afloat during the pandemic. The amateur investors became the chain’s white knight, providing capital that allowed it to stay in business for the foreseeable future. The merry pranksters see it as more than a savvy financial play. They have bought billboards around the country, including one in Kalamazoo, Mich., that proclaims, “Save AMC. More than a movie theatre.” A post on the chat board—one of dozens in the same vein every day for the past week—begins by detailing a list of straightforward economic reasons for investing in the company. But it finishes, “Going to the movies was my childhood. We must save my childhood. DO NOT LET AMC DIE.”
Members of Wall Street Bets have used their profits to pay off student loans; help family members who never bounced back from the 2008 housing crisis; and donate food, money, and GameStop Nintendos to children’s hospitals.
This softer side is perhaps one reason why, in addition to the David vs. Goliath angle, many in the public are cheering on Wall Street Bets. The fast-food chain Popeyes has appealed to customers who view the Redditors as heroes by offering free “tendies” (Wall Street Bets slang for chicken tenders) when you use the promo code “GME” (GameStop’s stock symbol).
“If we weren’t all losers, self-described or evidenced by myriad financial failures, we wouldn’t be in this swamp of a stock forum hunting down the next ten-bagger,” one Wall Street Bets user wrote for The New Republic.
Still, many opponents argue that the game will likely end with many average investors getting hurt from buying the stock at prices pumped to artificial levels. And financiers who consider the Redditors the “deplorables” of the financial world also point to the group’s online posts as evidence.
Their language, reminiscent of a junior high school yard, would make even the most hardened lunch lady’s hair curl. They refer to each other using slurs against mentally disabled people and joke about things like getting stock tips from their wives’ boyfriends. And those are the tamest examples of their garbage dump lingo. On Jan. 27, just as GameStop’s price was reaching its zenith and hedge funds were sustaining their deepest losses, the chat app Discord kicked Wall Street Bets off its service for “hate speech, glorifying violence, and spreading misinformation.”
Professor and retail investor Matthew Millsap said he saw posts he would describe as racist, sexually explicit, and anti-gay. “I can’t necessarily claim that it was representative of most users, though, and it’s probably worth bearing in mind that the past two weeks produced a flood of new members both on WSB and in the Discord server,” he said. Asked if other Reddit and Discord chat rooms feature similar language, he said, “Probably so in some arenas, but WSB goes out of its way to be offensive in that regard, I think, but with it all being more tongue-in-cheek since the WSB community expects it. [The movie] The Wolf of Wall Street is the vibe they are going for.”
Right-leaning tech titan David Sacks on the All In podcast called Discord’s move against Wall Street Bets “Parler 2.0.”
“There’s a lot of raunchiness in these rooms, but it’s not hate speech and it’s not organized for the purpose of hate. It’s organized for the purpose of trades,” Sacks said. “But what these [social media companies] do is weaponize these censorship rules.”
The day after Discord banned Wall Street Bets, former head of the Securities and Exchange Commission Laura Unger went on CNBC and called the GameStop rally a “platform-created frenzy.” She also argued for regulators to step in and control it, saying, “Not unlike what we saw on Jan. 6 at the Capitol, if you don’t have the police in there at the right time, things go a little crazy.”
Toward the end of last week, the trading app Robinhood, among others, temporarily halted accounts from buying more stock in GameStop, AMC, or other stocks the Redditors championed. That sent Twitter users into a rage against Steve Cohen, a billionaire hedge fund founder and owner of the New York Mets. Dave Portnoy, the abrasive, roughneck founder of Barstool Sports and an owner of GameStop stock, chimed in taunting Cohen for his history of insider trading and accusing him of having a hand in Robinhood’s actions.
Cohen denied it, but more significantly, he invited Portnoy to contact him offline so they could talk privately, and, the subtext was, politely. Portnoy, who drew criticism by mainstream media last year for his coziness to President Donald Trump, regularly telegraphs his low opinion of polite standards. “I don’t do offline,” he responded. “That’s where shady [expletive] happens.
It’s also where the power of the collective is diminished. The members of Wall Street Bets believe digital investors need coordination to compete with elite traders. They frequently use ape emojis and repeat the mantra, “Apes together strong.” In other words, the world may view them as dumb apes, but get enough apes working against you, and you’ve got yourself a big problem. Just ask the hedge funds.