To The Moon: Wall Street, Reddit and The Anonymous “Little Guy” Who Has Changed Investing Forever
Story and Graphic: Anne-Marie Crawmer
Unless you’ve been living under a rock, you’ve at least heard of the frenzy on Wall Street surrounding GameStop, AMC, BlackBerry and Nokia among others. If you have been living under a rock, welcome — Rep. Alexandria Ocasio-Cortez and Donald Trump Jr. finally agree on something.
Waiting, Watching, and Wishing
The past week’s financial squeeze of GameStop (GME) has garnered rabid attention by social media, corporate billionaires and the SEC. Wall Street hedge fund managers have found themselves scrambling and celebrities and politicians are rallying both for and against “the little guy” — but who is the “little guy”? As it turns out, the anonymous Reddit user behind the GME squeeze has been preparing for this moment for months, all in plain sight.
With a moniker to match the raunchy community where this squeeze began, anonymous user u/DeepFuckingValues — we’ll call them DFV — first posted about GME stock in September of 2019, where they shared a forecast marking January 15th, 2021 as the day the big squeeze would occur.
DFV shared the above image from their E*Trade account and received some ridicule in the comments. After initially purchasing 50 shares of GME in June of 2019, they had gradually gained 1,000 shares in the following months, gaining a total of $46,433 off of an initial investment of $53,566. To the average middle class reader, perhaps this figure seems a little large for a “little guy,” but the context is crucial. In the eyes of Wall Street, DFV’s net worth was a new car — all but something to be taken seriously in the eyes of the hedge fund managers that would begin to topple in the quarters to follow. All of this was coupled with a prediction for a squeeze on January 15th, 2021, a date well over a year away.
Reddit archives content and prevents new up and down votes, as well as comments, after a certain amount of time has passed. This means that DFV’s initial skeptics are well preserved, encouraging, and often insulting, DFV for not selling. They had made substantial gains off of a cheap stock. However, DFV wasn’t done yet. DFV continued to invest in GME, and returned to r/WallStreetBets monthly to share their successes.
In October of 2019, their profit rose to $51,933 and in November, that same 1000 shares had earned DFV $176,433. In the first and second quarters of 2020, DFV appeared more comfortable with selling, and his shares rose and fell with marginal gains and losses until the summer of 2020.
At this point, DFV had begun to gain notoriety within the Wall Street Bets community. At the end of August, DFV consistently stayed in the green, gaining over 271% on the 9,500 shares they’d bought in July. That margin continued to increase. September showed DFV a gain of 706% from their initial shares. In a pandemic year, DFV’s 10,000 shares now were valued at over a million dollars.
In October, that figure doubled to well over $2 million, and after a substantial dip, soared above $3 million by December 2020. Still, DFV’s original predictions slated January 15th for the squeeze of a lifetime, and DFV had no interest in giving up yet.
DFV’s first posts to r/WallStreetBets gained the attention of, at most, a few dozen people. Now, each monthly update (which turned into weekly, then bi-weekly updates around the dawn of the new year) garnered the attention of thousands of Redditors, who all had similar aspirations as their hero, DFV.
DFV bought their first shares in GME for around $5 a pop in 2019. Now that the stock was gaining traction online, the prices steadily rose to about $15 by the end of 2020. By this point, the r/WallStreetBets community had started to catch on, and rallied their wallets behind DFV in the hopes of seeing their own substantial gains, motivated by increasingly frequent updates from DFV’s E*Trade account.
On January 5th, DFV shared that they had now purchased an additional 40,000 shares of GME, the value of the shares now totaling, again, well over $2 million from a $793k investment. Beneath this post, one Reddit user suggested that DFV should purchase more stocks. DFV’s response, before going silent for over a week after, was simple: “Maybe I will.”
As it turned out, DFV didn’t need to purchase additional shares after all.
The squeeze continued to strengthen. By January 14th, just a day prior to DFV’s initial prediction, GME shares rocketed to $40. This massive jump finally captured attention beyond “the front page of the internet.” GME stock grew in popularity on Twitter. Mad Money’s Jim Cramer discussed the GME squeeze on live television and would soon refer to it as the “squeeze of a lifetime.”
Meanwhile, DFV (still holding onto their 50,000 shares) was now a multi-millionaire if they wanted to cash out, with his stocks holding over $7 million in value. Only, DFV did not cash out, and their enthusiasm for holding onto GME paid off. As the internet flocked to pick up the stock in the following days, and as share prices steadily rose above $50, $60, and $80, all DFV needed to do was keep up their enticing posts on Reddit.
At market close on January 22nd, DFV’s $785k stocks were worth $11 million. On January 26th, the same investment was now worth $22 million, a 2,237% gain. On January 27th, u/DeepFuckingValue had turned the initial $53,000 from 2019 into $47 million. By market close on January 27th, GME had reached a penultimate high, at around $380 per share.
A squeeze that began with an anonymous investor on the internet had turned Wall Street upside down.
Hedge fund managers scrambled to cover their tracks as GME continued to inflate. It was clear that Wall Street had been changed forever. Bloomberg, CNBC and The New York Times were quick to make claims that populist investors, often trading through brokerage apps such as Robinhood and WeBull, were more powerful than the market had previously given them credit for. Nothing like this has happened in Wall Street’s history, and without social media, it wouldn’t have been possible on such a scale.
However, it was not only Wall Street that had been changed forever, nor just the life of one crudely named, savvy-minded retail investor. On the 27th, at the height of the GME’s squeeze, social media was now full of investors sharing how this once in a lifetime gamble has changed their lives forever.
While the anonymity of Reddit’s users requires that readers use caution when discerning fact from fiction, social media was flooded with stories from these newly minted retail investors who had not just won big, but had in some cases won everything. They shared screenshots of their Robinhood accounts, a brokerage app targeted at millennial traders, and their intentions for their massive squeeze earnings.
In this surge of feel-good giving, and a plethora of users claiming that they’d invested their life savings and could now afford houses, student-loan debt, and medical costs, the day seemed like it had been won for “little guys” like DFV.
Robinhood: Terms and Conditions May Apply
However, on the afternoon of January 27th, the tide began to turn. r/WallStreetBets temporarily went down, as the subreddit’s moderators frantically accounted for the deluge of hopeful investors. Undeterred, the conversation carried along on other social media apps and discussion boards. With this conversation migration came r/WallStreetBets’ tendency to weave slurs into their investment discussions.
At least, this was the reason provided when popular discussion and voice chat platform, Discord, removed the r/WallStreetBets community from it’s servers. Discord released the following message shortly after taking action:
“Today, we decided to remove the server and its owner from Discord for continuing to allow hateful and discriminatory content after repeated warnings.”
“To be clear, we did not ban this server due to financial fraud related to GameStop or other stocks. Discord welcomes a broad variety of personal finance discussions, from investment clubs and day traders to college students and professional financial advisors. We are monitoring this situation and in the event there are allegations of illegal activities, we will cooperate with authorities as appropriate.”
Outraged, freshly minted retail investors voiced their concerns quickly that Discord’s intentions were not so transparent. Even billionaire Elon Musk criticized Discord for giving r/WallStreetBets the boot.
The market closed for the day, but the discussions hardly slowed down. GME’s stock dipped several points in after-market trades, but the biggest blow to this squeeze’s surge (and a foreshadowing to the consequences of the following day) were foreshadowed by Robinhood, the brokerage app used by a large number of investors to make their GameStop gains.
Near market close on Wednesday, Robinhood alerted its users to the volatile nature of what had now become known as “meme stocks”, or stocks being bought up due to r/WallStreetBets discussions. These stocks were all similar to GameStop in that the company’s futures were typically ill-regarded, and shares were cheap enough for the average investor to buy by the dozen — ranging from $2-15. The evening of January 27th, Robinhood issued an email to its users, warning them of the volatility of selling short (all with a heavy implication of that day’s meme stock activities).
The situation grew tense. The White House and SEC announced that they were now “closely monitoring” the situation. Hedge fund managers, who took the brunt of the financial hit, were furious. After short-selling managers bet against the dwindling GameStop stock for years, these same managers find themselves scrambling to appease lenders as GameStop rose. The same folks who have their living off of short-selling trades how have been beaten at their own game, by the billions — and they’ve been vocal about it.On January 25th, both Citadel and Point72 Asset Management are providing a private bailout to Melvin Capital Management in the wake of the GameStop craze. Citadel plays an even larger role in this story if you read on.
While these managers have been more than vocal about their lack of market luck this week, celebrities, politicians and average users from every walk of life have stormed social media in defense of the squeeze. Millionaires and the middle class alike have shared their endorsements of outwitting Wall Street non-stop since the craze became common knowledge earlier this week, contributing everything from congratulations to retail investors to their own suggestions for stocks to squeeze. Moreover, Ezra Kaplan of NBC announced that hedge fund mangers’ losses tallied in the billions as of January 27th.
The morning of Thursday, January 28th, retail investors woke up to an unwelcome surprise.
Robinhood had halted sales of meme stocks, including, but not limited to, GameStop (GME), AMC (AMC), Naked Brand (NKD), Nokia (NOK), and BlackBerry (BB). Users who had placed after-market orders received notifications that their orders had been cancelled. Users could no longer purchase these shares in the app.
They were permitted, however, to sell.
Accusations flew. Members of r/WallStreetBets called for class action lawsuits and described Robinhood’s actions as market manipulation. Retail investors also shared that Robinhood, a privately held company, was affiliated with Citadel, who has a good deal of stock tied up in GameStop. This author is unable to determine if the organizations are affiliated at this time.
Regardless of the reason, Robinhood cited volatility concerns for closing the app down. Other retail brokerages soon followed suit, including TD Ameritrade, WeBull, and CashApp.
Principle Over Profit
As the market opened on the 28th, GME rocketed to $460 a share within thirty minutes of market open, and then unceremoniously dropped to $153. The stock has continued to fluctuate hours before the market’s close.
For many, however, the journey is far from over.
Users on r/WallStreetBets insist that they are continuing to invest, and in their own, vulgar way, demanding that fellow investors #HoldTheLine, #DoNotSell, and to ride their stocks #ToTheMoon, not simply for profit, but in spite of Wall Street’s fat cats who want to see them sell.
Every bubble pops eventually, but this wave of stock market activism has real and radical consequences for Wall Street. As class action lawsuits have begun to spring up, citing Robinhood and similar brokerage’s market tactics, there is bi-partisan support for an investigation into these organizations and how they may be breaking the rules of their own game. Tips continue to pour in left and right that there was collusion on the part of brokerages and hedge fund managers in an attempt to overcome the squeeze. As these efforts gain traction, this fresh wave of investors has devoted their wallets in an unprecedented squeeze, not just to make ends meet, but to stick it to the man.
As any experienced trader will tell you, Wall Street trading is a gamble. Predicting ups and downs has been the obsession of stock traders for centuries and in the age of Reddit, Twitter, and Robinhood, this game remains mostly the same.
However, following DFV and the “memeification” of stocks like GME, a hailstorm squeeze against hedge fund managers and the quickly growing bi-partisan support for an investigation on behalf of “the little guys,” that age-old game of the greater fool will undoubtedly be getting some new rules.