Earlier this month, Reddit entered into an epic battle with Wall Street over the stock price of video game retailer GameStop. Online communities like the WallStreetBets subreddit banded together in an attempt play big investors at their own game.
Over the course of a few days, amateur investors were able to bring major investment firms to the brink of bankruptcy and push GameStop's share price to an incredible peak of $483. The retailer's stock was floating around $18 at the start of January 2021, so I'm sure you can see how this staggering increase had a seismic impact on the market. Hedge fund firms scrambled to take Reddit down, and the US Government promised to monitor the situation. All the while, these amateur investors relished their success, with some even putting their newfound wealth into charitable causes.
Unfortunately, the US stock market has reminded us all once again that the whole damn system is basically one big gamble. GameStop stock has plummeted to $90 at the time of writing. While that's still a huge improvement on what it was, a number of investors who got involved in the midst of the Reddit frenzy are now suffering major losses.
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As reported by PC Gamer, one investor put $1.1 million in options on GameStop stock and lost $850,000. "I just want my money back but I know it is gone," wrote Slik, a 52-year-old Nevada resident on the WallStreetBets Discord. "I just didn't spend enough time to research what I was doing, or what the market could do to my account so quickly."
Others didn't put in quite as much, but have been hit just as hard. Those who decided to pick up stock during its peak assumed it would hold steady - or even grow further. It's a risk that has not paid off. Another Discord user by the name of Housecat said that they picked up two shares priced at $316, but that was $632 they couldn't really do without.
"My income is low, and this stonk sinking this low after buying it so high is a big hit." Housecat explained. "I'm hurting. Not nearly as bad as others, but it's not great. Luckily I'm in the military and I'm not married, so my expenses are low, don't have many bills. But I will have to cut back on how often I eat out, or when I buy groceries. It'll be a lot of playing video games and going to the gym to prevent spending any money for now. Just have to recover from the losses."
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These losses are an unfortunate reality for many users who jumped in on the hype without a complete understanding of how everything worked and what they were getting themselves into. Various financial experts and publications - including Forbes - warned that amateur investors could be badly hurt, and that GameStop's meteoric rise could just as swiftly be met with a sudden crash.
"After this experience day trading, the second I can pull out for some profit I'm likely never going to day trade and do this stuff again because it was highly stressful and not worth it by any means," said Shane, a user who picked up shares when they were around $390.
It's unclear if GameStop stock will return to the heady peaks of last week, but there are several users on Reddit who retain a determination to hold on and keep sticking it to Wall Street. Fellow investors are encouraging one another to "hold the line", instead of selling up and getting out, while others have suggested that GameStop's stock sliding the way they have is nothing more than a temporary discount, an opportunity to grab more shares on the cheap.
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I don't pretend to be an expert on this, at all, but it continues to be an absolutely fascinating story. All I would say as we watch it unfold, is that if you plan to get involved, absolutely proceed with caution. This thing is a damn rollercoaster.
Featured Image Credit: GameStop