Reddit’s battle with Wall Street over AMC, GameStop stock a ‘Ponzi scheme,’ can’t last

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GameStop shares are on an epic roller coaster that pushed them to the stratosphere. But for how long?

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Many of today’s adults spent their youths in GameStop stores. They lined up for console launches. They bought and sold games there, too. Now some of those gamers are rich after buying GameStock’s stock and encouraging their friends on Reddit to buy it too. GameStop’s shares rocketed higher than ever expected in the past couple weeks, and all because activity among jasa social media management media investors began pushing it up. Wall Street had bet heavily that the company would fail, but as the price kept going up, investors were forced to reset their wagers. That led the stock to rocket up, and then swing wildly.

And though the share price dipped on Monday, Feb. 1, by more than 30%, many Reddit users say they’re buying more GameStop stock, convinced it’ll rocket even higher.

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.» Keith Gill, the trader in the Reddit community who helped kick off the battle, told the paper he «didn’t expect this.»

Last week, on Thursday alone, GameStop’s stock hit all-time highs of $492.02 per share, only to drop by more than half a minute later. It closed trading at $325 the next day.

GameStop itself hasn’t fundamentally changed in the past month. It’s still a struggling retailer facing an uncertain future against the rising tide of online shopping. But its stock has shot up as much as 1,800% — 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.

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Over the past couple weeks, the financial world watched in shock as GameStop stock (or «stonk» as the reddit community calls it) 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 on Wednesday, Jan. 27, 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. The next day 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 apps appeared to either stop or impose restrictions on GameStop share purchasing for at least part of the day. 

The popular stock trading app Robinhood drew particular attention for what appeared to be the among the most restrictive new rules. People had been raising concerns about Robinhood for a while,  to a potentially dangerous degree. Now it’s being accused of outright market manipulation, including through at least one class action lawsuit filed already. Robinhood, for its part, said last week that market rules effectively forced it to put those restrictions in place.

Read more: GameStop’s stock spike fueled by slang from Reddit’s r/WallStreetBets community. Here’s what it means

«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 as shares were first beginning to swing. 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

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Reddit users are betting they can take GameStop shares «to the moon.»

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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 on Twitter. And TikTokers banded together in attempts to .

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, Jan. 27, it closed at $19.90 per share before dropping to $12.75. The next day, 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 last 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, r/WallStreetBets, is breaking records. Mashable reported that r/WallStreetBets counted 73 million page views for its discussion boards on Tuesday, Jan. 26, as stocks began to swing. Over a seven day span, 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, Jan. 27, Reddit’s mobile app tallied its biggest single day of downloads, industry watcher Apptopia said.

The whole drama’s even caught the attention of Saturday Night Live, which lampooned the Reddit investors as the latest sign Wall Street isn’t working.

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