GameStop: To the Moon and Back

[Music] there's this narrative that this was a david and goliath story it was all of these hedge funds like yours against the people and the people won i'll put it this way if a five-year-old walked into this room right now i could probably kick his ass if a thousand five-year-olds walked in here they could probably take me down just being honest about it is that a david vs goliath story uh you know no something happened this january that no one expected it was a little bit of like an internet revolution we were team human team normal regular guy it's united capitalists it's like this focal point a paradigm shift in everything that's gone on for the last few hundred years on wall street socialists if there was a smaller chance that i could have a direct impact on ruining some billionaire's life i wanted in on it and youtubers so how much did you make um 40 000 ish [Music] the idea that an internet forum could take a failing company and by collectively investing in it or to use the parlance taking it to the moon take on hedge funds and win seemed impossible but was this really a people's revolution this is not a david versus goliath story but more of a goliath versus goliath story the gamestop story is the story of its investors and we'll be telling it through the experiences of three amateurs in california who all buy and sell their shares using trading apps gavin may a 19 year old youtube star parkour enthusiast and amateur online trading guru do you sometimes wonder why people listen to a 19 year old who's been trading for like six months yeah no totally um that's definitely a very valid question john motter who works for a homeless charity he blames big finance for some of la's housing problems have you ever bought any shares before no first time first time and casper and matt who run a social media marketing company i'm a gambling guy and i really believed in the power of memes and i put my money where my mouth is a year ago gamestop to many was a business slowly dying it sells physical games as an actual shop and many on wall street thought that that business model wasn't just outdated it was prehistoric a business doomed to fail its share price this time last year was around the three dollar mark over the summer though a few investors began to proselytize about gamestop people like the then obscure youtuber keith gill aka roaring kitty many think it's a foolish investment but everyone's wrong they argued that far from being dead in the water gamestop in fact had potential gamestop is an established uniquely positioned player in a thriving 150 billion dollar gaming industry one group in particular was listening an internet message board called wall street bats so could you just describe to someone who's never been on wall street bats just kind of like what roughly what the culture is yeah i mean it's hard to do it without um without using offensive terms but it is very juvenile very self-consciously absurdist their favorite thing to do is something called lost porn where you share your biggest losses and everyone would be like hey man good job like you lost a million bucks good job man sort of the nature of the sub is like riskier bets i can't tell like what's a meme and what isn't but all those meme posts are feeding into the larger goal of getting as many people to buy stocks as possible slowly gamestop started to get a buzz and gradually the share price began to tick up this is the first official close above 14 so cheers to that so i first heard about gamestop through um the subreddit wall street bets i think the first time i bought in was late november to early december i think the stock price was around 16 back then gamestop share price had attracted the attention of another kind of investor short sellers hedge funds that thought gamestop was overpriced hedge funds like citron capital founded and run by this man andrew left gamestop for a long time to make it look like they were following the blockbuster video path and then also we found out in december while the industry was actually up video game industry had their best month ever december of 2020 gamestop actually had a bad quarter or a a bad month they were declining and that was supposed to be their savior month and that's where i started the shortest line left's hedge fund was now one of the many hedge funds that were short in gamestop essentially they were betting that the share price would fall if it did they'd make money but that had also been noticed by people on wall street bez gamestop happened to be one of the names that was most frequently shorted they'd worked out that if gamestop share price went up hedge funds would lose money and many users on the platform came up with a theory that went like this if enough of us were to buy it together in conjunction could we create a short squeeze which would force some of these hedge funds who are betting against gamestop to close out their position by buying game stock back and therefore pushing the price of gamestop even higher [Music] wall street bets is a forum on san francisco-based reddit one of the biggest social media companies in the world [Music] and watching on was its chief executive and founder steve hoffman i've known about wall street bets for years wall street bets is in fact one of my guilty pleasures on reddit was there a point where you were like huh this is a bigger story than i thought and wall street bets there's often a couple of stocks or companies that have their attention and so over the years it's been tesla it's been virgin galactic it's been blackberry and so in my mind i'm just browsing reddit and gamestop okay yeah the game stops there they're got their infatuation right now so i was actually a little late to the party because i didn't realize that reddit had leaked into the real world again and so it was i think really at the takeoff of the mania where it's like okay this is this is a bigger one by mid-january the price of gamestop shares was nearly 30 a tenfold increase from eight months before it was about to go stratospheric i got the champagne cheers congratulations look at this look at this sixty percent when did you start thinking oh dear something's happening here well when i went i was about to go do like a twitter live feed and i think like 150 000 people with the sign on in the first few minutes and remember that line from jaws i think i need a bigger boat it's it's about this point when gamestop shares truly took off ridiculous ridiculous ah i remember that day it went from i think we opened that like 39 dollars and the peak of the day was like 76 watching this chart gives me like heart problems are sort of good we both bought between what 70 and 80 dollars around there gamestop had another wild day of trading it was ridiculous we're texting each other all night there was a couple mornings where a couple of really good mornings yeah game stop isn't stopping fueled by social media the video game company all the money you had in the world was doubled yeah just crazy completely crazy yeah and i mean and that was only like that was like the first of like the five day craziness gamestop was going to the moon the price was going up and up and up there's more and more activity more and more news more and more attention the video game retailer hit a high of 380 dollars a share gamestop was now in uncharted waters its share price had increased by a hundred times since march we have gained stop hitting three hundred dollars and three hundred and fifty dollars and there was even an after-hours session once the market was closed but you know especially large institutions can still trade where it hit four hundred and fifty dollars i bought in around 3 30 i think the first year so i was a late comer word got out that there was a good chance that the hedge funds and billionaires that got greedy and bought those enormous short positions were going to be completely ruined over this and so even if there was a smaller chance that i could have a direct impact on ruining some billionaire's life i wanted in on it [Music] steve hoffman was looking on he had the power to switch wall street bets off was there any pressure on you to maybe lock down wall street verts um we've faced that question like that literal question is is there pressure should you do something but our our um motivation or what we were trying to do our duty in that situation was actually the opposite to keep wall street bets online so we did take a you know of course a closer look here but really we were making sure that the community didn't break because a lot of people were coming to reddit for that experience with reddit keeping wall street bets up it now seemed unstoppable you can ask how much you lost in total no i mean i think the fund was down approximately i don't even know 18 19 18 possibly how much is that in cash terms i won't discuss that that figure is certainly in the millions and likely the tens of millions [Music] but then something happened one of the biggest trading apps used by amateur investors called robin hood based here near san francisco made a crucial decision [Music] it and other trading apps were happy for people to sell gamestop shares but they decided to restrict people from buying them that really took the the wind out of the sales for the whole movement because now the majority of the people can't even buy this stock and obviously you know a lot of people started freaking out a little bit robin hood's reason well their chief executive testified to congress that they'd run out of capital to meet deposit requirements or in other words so they claimed they were running out of money we don't answer to hedge funds we serve the millions of small investors who use our platform every day to invest and then it basically started falling back down to earth and first it fell back to the sort of 200s and then 100s the clue to robin hood's branding is in the name a trading app that self-reported mo was to democratize trading had to some protected the rich no one cared like and it happened right in front of your face they blatantly did it and no one can say anything so that's when we were thinking okay we should you know we give brands and companies a voice all the time let's try giving the little guy a voice for something that we really are passionate about you decided to fly a plane over robin hood's offices in the bay area we did yes i think yeah robin hood catching the brunt of this is told like they created that irony for themselves they they cashed in on the brand image of democratizing trading and making it so that the the average man can participate and play in this much bigger game that typically they you know they've been closed out of and as soon as the little guy starts to actually like win some chips at the table then they have to shut down the game one of the things that came up time and time again when talking to amateur investors is how much they believe that the financial systems were rigged to benefit the rich and much of that seemed to stem from the 2008 financial crash well nothing was learned from 2008 no one was held accountable the banks were bailed out you know i couldn't get a job i couldn't afford housing at that point you know i crashed on a friend's couch you can kind of see on the post like the difference between the memes and the jokes and the person who's like you know this is for my immigrant parents this is for the people who ruined my dad's business in 2008 there's a lot of earnest posts on there still [Music] it's not just socialists who think that jordan belfort was a vocal supporter of wall street bets his financial crimes were characterized in the film the wolf of wall street and that's a real wolf that is a real real live wealth that was there at the time he went to prison but claims now to be reformed when i got indicted and went to jail never once did it occurred to me that i was innocent seriously i never felt like i was persecuted i got what i deserved i trusted the institutions that put me away in jail i did my time and i got out i rebuilt my life most people today don't trust the institutions that are essentially metting out justice they watched what happened in 2008 and we all saw the movie the big short at least many of us did at the end is a funny scene funny where they say and all the bad guys went to jail and they're like ah just kidding no one went to jail and we laugh or at least smirk because we know it's true but in our stomach it's not right we know it and it erodes the trust of the people so i think you find a lot of people right now they just they know it's not right [Music] by early february the share price of gamestop was about a tenth of its market high and on the way down people lost a lot of money [Music] casper shares were at one point worth around a hundred thousand dollars he sold a few but he hung on to most of them he says out of principle on the way down his shares decreased in value by more than sixty thousand dollars i could have made a little bit of money but i think the experience i think some people are going to be mad that i'm saying this but i think the experience was was worth it you know it's i don't really get too attached to the gains until until i've sold john motter bought high he says he only invested what he could afford to lose but many others bought high thinking gamestop would go to the moon and lost big and i do think that there were many who strongly believed that they could drive the price up and it would just stay there and it would stay up forever and the only thing i can think of that functions that way has been bitcoin gamestop didn't behave like bitcoin though and many people holding on to their shares were being egged on by other reddit users whilst others were selling those are definitely people trying to get everyone whipped into a frenzy so that they can cash out so you're constantly saying that you're taking it to the moon while at the same time yourself trying to divest but it's easy to forget that there's really millions of people on here that aren't commenting all they have is a username and they just joined it and they're just reading along making their own decisions reddit is like the definition of confirmation bias because the way the platform works is that content gets served to you based on how many upvotes it gets so people have to agree with you for your content to reach the front page so that means you're only going to hear from the people who are saying what people want to hear you're only going to hear from the people who are diamond handing it right so someone said do you know what guys i think we should sell up now no one's going to like it no one's gonna like it so so it's just the more extreme funny stuff that gets upvoted and then you get that false bias that's so interesting [Music] i asked reddit's boss whether he felt any responsibility for those who lost out i think any trade any trade not just a a risky one like in like that wall street bets is known for has risk but it also has opportunity and and i think it's it's important that individuals have that opportunity like i don't think we as a society should be so paternal to say that well this group is smart enough to make these decisions but this group you know we should keep them out and nobody goes to wall street bets thinking that this is a safe place to spend money gamestop has been characterized as a wall street bets versus wall street battle but we didn't interview anyone who thought it was as simple as that i suppose the question is to what extent was this a people's revolution it was certainly started as a people's revolution and then i'm sure it would be only logical that any shrewd large investor would say hmm look what they're doing let's jump on that bandwagon and i think the important thing and what makes this dangerous is those sophisticated investors that got in on the back are smart enough and sophisticated enough to know when to get out of the situation while the little guy is typically the one that gets gets end up holding the bag and that's very dangerous and sad tantalizingly what could have happened is hedge funds taking aim at other hedge funds this narrative that it was just wall street bats that moved it i mean a lot of other people think uh no there must have been much bigger forces at play obviously there was a short squeeze obviously it could well have been hedge funds trying to screw over other hedge funds sure really absolutely you do you think other hedge funds were doing that potentially i mean if you saw an opportunity to make money it's it's legal it's fair to go buy stock it's an open market what's without doubt is wall street bets helped to start things rolling but much larger financial players were also heavily involved people using robinhood and people who are not large institutions are not registered financial professionals are a bigger part of the market than they've ever been they're about a quarter 25 but they're still a small player relative to the biggest institutions and so when you see a price movement from gamestop at 18 all the way up to 325 it's very unlikely that the only people that are buying and driving that price up are the retail traders just by virtue of their size in the marketplace so what just happened was this something extraordinary did something change and could it happen again you're going to find that the large institutions have already made changes in their policies that pretty much prevent these extreme situations from happening i would be certain that right now there is not a chat board out there that any hedge fund doesn't have their people in there in every single chat watching everything that's going on andrew left says he'll think twice about shorting in the future did i lose money on games up yes i talk and i move on i'm of many good years ahead of me in the stock market i hope you don't think that what's happened will make people more nervous about shorting in the future of course they will i don't know of course and as for gamestop well it's now looking to move its operations digitally its share price is still incredibly variable in february it's been between forty dollars and two hundred dollars casper and mats believe what happened shows what the internet can do through collective action i think from now on hedge funds are gonna have in their risk models and prediction models there's gonna be a new line item in there like hey watch out for this uh like everyone ganging up on us and grouping together scenario that's never happened before that's without the internet that would be impossible to accomplish that john's investments was relatively small but he lost most of it i don't think any like change has come out of this um that's been that's been pretty apparent i hope people like see that i hope everyone who gets screwed over does see that no one's coming to bail them out and changes aren't being made to help the little guy if nothing else happens i hope people get educated around that and just like learn a lesson and gavin says he ended up making 40 thousand dollars there is this kind of assumption that a lot of people who are on wall street bets were just there to like make a political point about hedge funds but actually there were lots of retail investors that were there to make money yeah no definitely um i would say you know as much as people say that they want to make a point about the hedge funds at the end of the day they all they all wanted to make some money what's clear is that trading apps have transformed the financial system trading's become more democratic but conversely it's also become more risky exaggerating the highs and the lows the story of gamestop then is both inspirational and cautionary if this was a revolution it was one that had its casualties of some investors who reached for the moon and didn't quite make it [Music] you

Channel: BBC Click

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Id: ghwJYpUoqQE

Length: 23min 4sec (1384 seconds)

Published: Tue Mar 16 2021