Subreddit “Wallstreetbets” takes edge casing to a new level
Posted by Elsie K on
Whats up gamer monkeys! If you have not already heard, there are some major things happening on Wall Street these days. Over the last few weeks users of the subreddit Wallstreetbets have turned the market on its head. But if you are like me, and have spent more time playing Halo than the stock market, allow me to give you a quick breakdown of exactly what's going on, and how the dumbass geniuses down in Wallstreetbets are disrupting the market in ways we have never seen before.
I’ll start at the beginning. Some time ago a wealthy hedge fund called Melvin Capital wrote an article condemning the company Gamestop, calling it a “Doomed enterprise” and predicted its bankruptcy by late 2021. Melvin Capital made the mistake of publicly stating they intended to “Short-sell” Gamestops shares. What is a short? Basically, it’s a bet against a stock. If the stock goes up you lose money; if it goes down, you make money (read more about how shorting a stock works, here).
Well a reddit user by the name of Stonksflyingup, had a hand to play. In what would come to be called a “Prophetic meme” Stonksflyingup, with a single meme style video (watch it: it is hilarious) rallied many members of subreddit Wallstreetbets into action. His bat signal in the sky was a simple message: buy Gamestop.
Now, I seem to remember from my highschool economics class, that if demand rises, then so does price. And that's exactly what happened to Gamestop’s stock. As more and more reddit users began buying up every gamestop share they could get their hands on. The price just continued to rise.
Like with any game, the stock market has rules (don’t ask me who writes them, maybe the SEC?), and like with any board gaming group every once in a while there comes along a player who reads and interprets the rules a little differently.Technically an edge case is where a designer (of a game, financial system, computer program) believes a particular situation will happen so infrequently that they don't write a rule to address it, or they didn't predict the situation in the first place. For this reason, among board game players, it is sometimes common to hear the term “Edge Case” used to describe a person. It means that you aren’t necessarily breaking the rules, just understanding them in an unconventional way.
What Stonksflyingup and the rest of the reddit bros on r/wallstreetbets have done is edge case the market to the tune of 10 BILLION dollars. That was not a typo. $10,000,000,000. Almost overnight rumors began spreading that Melvin Capital had filed for chapter 11 bankruptcy. Whether or not these rumors are, in fact, true is hard to be certain of. But if the rumors are true, I, for one, find the situation extremely ironic, considering chapter 11 is exactly what Melvin Capital had predicted for gamestop.
Any gamer monkey worth their weight in bananas will tell you, gamestop has always been a rip off. “Bought a PS5 for $450? We will give you $50 store credit or 40 bucks cash.” sound familiar? In fact gamestop was my first taxable income in highschool, and they still owe me 300-ish dollars in unpaid payroll. “Power to the players” - my left buttcheek.
But gamestop isn’t a playable hero in this button-mashing-all-out-brawl, they are the battlefield. And the fight is really one between rich ass business stiffs and the little guy. Ironic that most of the transactions in gamestop’s stocks happened on a trading platform app called Robinhood, but more on that in a bit. The real story here, and the one I find most media outlets glossing over is that this situation perfectly illustrates what happens when, WE, us, the average everyday 9-5 grinding middle income schmuck, gather together en mass to stick it to the rich f**ks of the world.
Personally i had very little skin in this game (if you must know i made a little under $1000 on stocks I have held since the aforementioned stint in high school working for Gamestop). And though I have been known to slum it down in the depths of WSB from time to time, I have always found it akin to hanging out in a dive bar in a city you aren't familiar with, cool for a bit; until you realize you are surrounded by degenerates. Yet somehow despite their prescription drug induced buying habits and offensive language (because i am totally not guilty of that), WSB somehow got it right on this one. REALLY right.
But to the hedge fund rich dudes the fight was not over. Like the rules-nazi’s they are, several other small hedgefunds including Point72, injected some funds (somewhere in the neighborhood of 3 billion) into Melvin Capital. Doubling down and using conventional strategies against the edge cases that are WSB.
We can fast forward to the end of the game: the rich dudes lost. And then they cried to mommy. And mommy wasn't happy. The SEC earlier this week shut down all trading of GameStop’s shares in order to “ monitor the market for insider trading”. Everyone has their price, and even the app Robinhood sold out, and shut down trading within its app for a time. Today the stock is selling for just under a hundred dollars, a far cry from the height of just over four hundred a few weeks ago, but remember the stock this time last year was only $23. Melvin Capital, Point72 and all the other big hedge fund guys, took a hit, a hard one, and they are still licking their wounds.
“But, Retroforge, what i really want to know is what Wallstreetbets next prediction is going to be…” Yeah, you and me both. WSB calls them “meme-stocks” and they are currently looking at AMC, Bed Bath & Beyond Inc., iRobot Corp. and GSX Techedu Inc. (please note I am NOT a financial advisor, I can barely make my car payments on time). But who knows, these guys play the market like it's a casino, and it really is true what they say, "You win some, you lose some." I for one plan on waiting and seeing how the next round of combat turns out.
-This article was written by Retroforge, a geek and pop culture enthusiast and scholar. He lives in Las Vegas, where he keeps his finger on the pulse of all things geek and nostalgic. He writes about what excites him, and in his free time he often rolls twenty sided dice.
To see more of his work check him out on intsagram @retroforged
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