When you think of the guys hanging around GameStop, you don't automatically assume financial geniuses. The technological version of Comic Book Guy from the Simpsons might be a more appropriate role model than Patrick Bateman or Jordan Belfort.
Yet these blokes have managed to cause a huge stock market crash - by buying shares in the parent company of GameStop, making it gain 800% in value overnight and throw a load of corporate pros out on their jacksies in the process.
It's quite complicated, but here's kind of how it worked. The subreddit r/WallStreetBets are in one corner, a niche little piece of one of the nicher little parts of the internet, and usually a discussion group for people buying and selling low level shares on the stock market.
In the other corner, we have hedge funds, who bet on movements in the markets, and short sellers, who try to predict which stocks will fall in value rapidly. Guess who won?
GameStop had been doing poorly of late, losing value as a result of high investment in brick and mortar retail locations and a general trend in the gaming industry away from having to go buy a copy of your game and towards instant direct downloads.
Since January, r/WallStreetBets had been slowly buying up stock in GME, the company that owns GameStop, since the turn of the year, which caused those who had bought stocks in the hope that it would fail to buy more, to insulate themselves from potential losses, which further drove up the price, which led to where we are today.
Where we are today is a situation where GameStop's share price has gone from $4 to $200 within a year and the stock price had jumped 134% in a single day. One of the hedge funds that bet against GameStop, a group called Melvin Capital, had 30% of its value wiped off and has now requested at $2.4 billion bailout to stay afloat.
The GameStop incident is just an example of how groups like r/WallStreetBets have democratised the stock market: it used to be that you paid an analyst to understand it for you, but now, there's a whole community of experts out there on the internet giving advice to follow.
"What I think is happening is that you guys are making such an impact that these fat cats are worried that they have to get up and put in work to earn a living," wrote one of the moderators last week, in triumph at how the little Reddit chat had changed the face of finance.
"That fuzzy sensation you are feeling is called RESPECT and it is well earned. Wall Street no longer dismisses your presence anymore."
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