But GameStop is a mainstay in the public gaming consciousness, and the brand recognition has driven WallStreetBets to embrace the struggling brand. And whatever is happening with the stocks is not indicative of the business' actual current performance, which is still struggling. We compete with a bunch of generalist retailers who don’t have the same seasonality as we do because they sell paper towels and loaves of bread and they can use video games as a loss leader to sell a loaf of bread.” The increased competition has forced GameStop to close around 400 and 450 stores in 2020, and the COVID-19 pandemic has not helped physical retailers like GameStop in the least. When IGN spoke with GameStop’s chief customer officer Frank Hamlin back in 2019, he explained that “As a specialty retailer, we are linked at the hip to this category of video games. A brick-and-mortar video game retailer, GameStop has not been able to compete with digital retailers like Amazon as well as the growing trend of customers buying primarily digital versions of games through portals like Steam, PSN, or Xbox Live. GameStop, a Meme?One reason why the GameStop stock situation is so absurd is that for the past three years, GameStop has been struggling as a business. One of which was Melvin’s bet against GameStop. The subreddit is also claiming a “victory” against hedge fund Melvin Capital Management, a short-seller that the Wall Street Journal reports is getting an outside investment to help stabilize the fund after a variety of short bets fell through. One thread by user u/dumbledoreRothIRA is titled, “I’M NOT SELLING THIS UNTIL AT LEAST $1000+ GME” with an additional expletive and some rocket ship emojis for good measure. The energy the subreddit brings into trading can only be described as chaotic. The biggest success story is someone who goes by u/DeepFu*kingValue on WallStreetBets who regularly updates the subreddit on the price of their option which is currently valued at $13 million. One investor named Sage says they’ve only been following r/WallStreetBets for “around two months” and that investing is a “side hustle.” For “about five minutes” Sage’s GME options were worth $33,000, based on an initial investment of $1000. In keeping with their 4chan with a Bloomberg Terminal mantra, these traders prefer memeing their way through Wall Street, using terms like FOMO or YOLO to explain away their investment decisions. “I had seen the subreddit in some YouTube video after I got into trading but was only doing my own thing until this GME stuff really started to pop off and I bought in,” one trader, who asked to go by Ike for privacy reasons, tells IGN. And all three also joined the community fairly recently with the longest member following the subreddit about a year ago.
Three traders from r/WallStreetBets IGN spoke to say that they are not full-time traders, while a fourth says they’re still relatively new to trading. Who Is Squeezing Wall Street?In speaking with traders on r/WallStreetBets, it’s evident that these traders are not wolves of Wall Street, but hobbyists who trade on the side and have either a clear-eyed or irreverent view of the stock market. Short sellers rushing to buy while minimizing losses created a rush to buy GameStop stock, which in turn drove up prices.
Redditors on r/WallStreetBets saw the short early and moved in to buy GameStop stock early and cheap, creating a short squeeze. But instead of going down, prices are going up, and this is bad for short sellers who have to buy back the stock they borrowed. If that happens, they can buy back the stock for even cheaper and keep the difference as a profit. Some Wall Street investors bet that GameStop would continue to struggle and began short-selling the company, a strategy where an investor borrows stock of that particular company - in this case, GameStop - and sells it in the hopes that prices for the stock will continue to drop.
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