The Game Stopped
"So RobinHood is saying they are protecting their users from over leveraging and getting burned. But somehow it’s okay when hedge-funds literally do the same exact thing. Nobody had a problem then until the hedge-funds lost. Now speculating is a huge issue.” - Dave Portnoy
Did you catch what happened last week with the run on so-called “meme stocks?” Essentially, regular people took on the Wall Street establishment and beat them at their own game — until the elites leveraged their institutional advantages to rig the system and freeze users out from purchasing stock.
And we wonder why so many millennials think the system is rigged and support politicians such as Bernie Sanders? This is the same generation that came of age in proximity to the 2008 financial crisis and saw their parents lose their jobs, lose their retirement, or lose both while they battled chronic under-or-unemployment. Many in this generation were raised in the shadow of limitless prosperity and opportunity, only to grow up and find the American dream out-of-reach.
This skepticism of the status quo came to a head last week when some astute individuals on the Reddit message board ‘r/WallStreetBets’ noticed that GameStop had become one of the most heavily shorted stocks on Wall Street. The massive community realized that collectively they could initiate a “short squeeze” by purchasing GameStop shares and inflating the stock’s price, propping up the company, and making a profit for small-time investors at the expense of hedge-fund elites. (Confused? Click here to learn more.)
“What kind of soulless human being do you have to be to short brick and mortar businesses during a pandemic? When these companies are not even allowed to legally operate. [These hedge-funds] care nothing about America.” - Tyler Winklevoss
Against conventional wisdom, the plan worked. GameStop shares skyrocketed from under $18 a share at the start of 2021 to over $347, causing the investment funds shorting the company to lose billions. It worked so well that Melvin Capital required a cash infusion of billions of dollars to stay afloat.
The Wall Street establishment was not pleased. Within hours, RobinHood froze the ability for its users to buy stock in GameStop (and other meme stocks) and the price plummeted instantly as countless individuals were given the choice to either watch the value in stock disappear or sell.
“You can’t change the rules without telling anybody in the middle of the game. Everyone was playing under the same set of rules… the irony the app is called Robinhood… and they are stealing from the poor and giving back to the rich.” - Dave Portnoy
The irony of a platform launched to democratize investing and bring stock trading to the masses doing something like this cannot be understated. It is unconscionable for a brokerage to prohibit its own customers from trading in a way that was beneficial to them simply because they feel pressured to preserve the wealth of those already worth billions.
Regardless of how you feel about the mission of r/WallStreetBets, these actions need to be investigated and those responsible need to be held accountable. The speed with which big monied interests were able to stop a widely popular threat to their own pocketbooks should give us all pause.
This is not a partisan issue. This is one of the rare issues that unites the likes of Alexandria Ocasio-Cortez on the far-left and Senator Josh Hawley on the far-right. The lessons learned from this event should not lead to reigning-in or limiting everyday investors, but instead should be seen as an opportunity to shine a light on wrongdoing, hold those guilty to account, and help restore the trust that has been broken in many young Americans. Let's not waste it.
