While in Spain Internet forums and chats are sometimes seen as something typical of the early 2000s, in the US they have become a platform from which to shake Wall Street. This is the case of the content aggregator Reddit and its subforum Wall Street Bets (Wall Street bets), full of users who are winning the pulse of important investors.
This chat is largely responsible for the fact that the US stock markets have been experiencing some crazy days with spectacular rises in listed companies that present questionable fundamentals. The most paradigmatic case is that of the GameStop video game store chain, which has risen more than 400% so far this year due to pressure from these forum members. Other listed companies such as the Blackberry telephone company, the retailer Bed Bath & Beyond or the AMC cinema chain are included in this ‘chosen’ list.
Chat users are mostly young (millennials) who have jumped on the trading bandwagon through commission-free platforms like Robinhood and have changed the investment landscape considerably in the last year. Instead of diversified portfolio forms or following more traditional guidelines, they go in search of when they don’t go straight to spur companies they like but are gripped by bearish investors precisely because of their bad fundamentals. In the forum is where the signal to go for a certain value is given.
A perfect example is given by a young forum user who claims to have put his father’s life savings into Blackberry stock. Precisely the telephone company rose this week on the stock market more than all of last year due to the push of these ‘rebel’ retail investors. “Either he retires on a yacht or asking for food stamps,” summarizes the young man on Reddit about his father.
However, far from the anecdote, the battle with the more institutional bass players is reaching almost dramatic heights. Short traders in the US stock market are taking a historic hit as these retailers buy shares of Wall Street’s ‘most hated’ stocks. According to Bloomberg estimates, the 50 companies with the most short positions against them in the Russell 3000 Index are up 33% so far in 2021.
“Wall Street Bets is bringing down Wall Street single-handedly. Power to the damn people. I’m so proud of all of you illiterate retards,” a forum user wrote Monday after learning that GameStop bears had lost $1.6 billion. of dollars. In the case of this listed company, one of the bears, the Citron group, received threats from the forum members after publicly stating that the price of the share should be at 20 dollars and not the more than 100 that it reached in several phases of the day on Monday.
This has twisted the arm of important funds such as Melvin Capital, which if it had started the year with 12.5 billion dollars and the poster of a good performance in previous years, in the first three weeks of 2021 it has left 30% for its short positions and has already had to receive an injection of capital, states the WSJ.
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