Mass psychosis? Reddit’s making AMC, GameStop stock go wild

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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 bought and sold games there. They lined up for console launches, too. Now some of those gamers are rich after buying the company’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 between social 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. 

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, saying it “gamified” stock trading 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.”


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 overwhelm racist hashtags on Twitter. And TikTokers banded together in attempts to confuse President Donald Trump’s reelection campaign.

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.

But when the memes stop and the excitement goes away, GameStop will go back to being that struggling video game retailer at a time when gaming is increasingly moving toward streaming and the idea of stepping into a physical store is still a nerve-wracking prospect during a pandemic. At that point, stock analysts say, whoever’s left holding shares will see their value evaporate.

“This is unnatural, insane and dangerous,” Michael Burry, a prominent GameStop investor and one of the subjects of the book and movie The Big Short, wrote in a now-deleted tweet. His roughly $17 million investment in the company ballooned to at least $250 million last week, give or take a few swings in the share price, Markets Insider reported.


Many gamers spent their childhoods going to GameStop.

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Who listens?

Michael Pachter, a longtime video game industry analyst at Wedbush Securities, said he hasn’t even bothered to update his stock price expectations for GameStop since shares started going crazy. “Who’s listening?” he said in an interview last week. “Nobody cares what a sell-side analyst says right now.”

To him, there are reasonable explanations why people could be somewhat excited about GameStop. One of its newest board members, Ryan Cohen, helped turn Chewy into one of the largest online pet product sellers in the world, before selling it to PetSmart. GameStop’s also on a track to being profitable again.

But that doesn’t come close to explaining GameStop’s share price now. “It’s a Ponzi scheme,” Pachter said, referring to a form of fraud that appears to make money but in fact is only propped up by funding from new investors. “There is a point where it’ll go down.”


Many of the Reddit users buying up GameStop shares see this as a way to fight Wall Street greed.

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He suspects that may happen after the company reports its quarterly results in March, at which point executives and investors on the board are allowed to sell their shares.

In the meantime, industry watchers are attempting to understand what forces are at play in the drama, and what these swings say about the economy.

“When you see what’s happening with GameStop, you ask yourself, is this manipulation, is this mass psychosis or is there something wrong in our market structure that is causing this to happen,” James Angel, a finance professor at Georgetown University’s McDonough School of Business, told the New York Times.

One thing analysts watching wonder is whether the Reddit investors will lose their millions whenever the stock eventually crashes back to earth. Rogozinski, the man who helped found the Reddit community, said their approach to investing as more like gambling than traditional analysis and strategy. Its members, who the community identifies as “degenerates,” often encourage one another to push all their funds into one stock, riding it up and down. Their posts are punctuated with phrases like “hold the line” and “diamond hands” (hold onto your stocks for a long time) and YOLO (you only live once).

He told the WSJ he never imagined the Reddit community would morph from its beginnings to what it’s become. “It’s a little like watching one of those horror films where you can see the bad guy slowly going up the stairs,” Rogozinski said.

Indeed, even Keith Gill, the community member who helped kickstart the initial battle over GameStop, told the Journal he was surprised by what it’d turned into.

“I thought this trade would be successful,” he said, “but I never expected what happened over the past week.”

In the meantime, the social media hype is continuing on Reddit, where users are declaring their intention to buy and hold more GameStop shares, all to send prices even higher.

“My mom told me it’s time to sell,” one Reddit user wrote on a post about GameStop’s stock moves. “Should I find a new mom?”

“Yes,” another user answered. “The answer is yes.”

Read more: Why GameStop, BlackBerry stocks suddenly jumped, thanks to Reddit


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