(CNN) — The meteoric rise in GameStop’s stock, as traders congregating on Reddit and Discord take on short-sellers and hedge funds, is hard to look away from. It’s the closest thing Wall Street has to David vs. Goliath.
What’s happening: Shares of GameStop, a legacy company whose stores are often located in struggling malls, have soared dramatically over the past two sessions as day traders push the stock with growing fervor. The stock, which closed out 2020 at $18.84 per share, finished the day at $76.79 after trading was halted multiple times due to volatility. At one point, it climbed to nearly $160, a record high.
You read that correctly. GameStop, which is expected to lose money this year and next, has more than quadrupled in value in under a month because it’s effectively become a meme stock. Since the beginning of 2020, it’s jumped more than 1,100%, outpacing even Tesla’s gains. Shares are up another 20% in premarket trading.
Investors on social media had been arguing that GameStop was seriously undervalued and cheered earlier this month when the company added Chewy founder Ryan Cohen, who has been pushing a digital overhaul, to its board. Now, the focus is on momentum, as small investors hope the hype can help the stock keep rising.
It’s evident, however, that the saga has grown into much more than an argument over the future of a video game retailer, or the merits of different trading approaches. As no-fee apps like Robinhood democratize access to financial markets, some are reading it as a generational fight between the old and new guard of the investing world.
Users on Reddit cheered when veteran short seller Citron Research said it would stop commenting on the stock, citing harassment from GameStop’s backers. Melvin Capital Management, which bet against GameStop’s rise, has had to accept an infusion of cash after suffering steep losses, the Wall Street Journal reports.
“As someone who started trading stocks in the late ’90s in college, I would always remember watching when the small retail trading groups would get crushed by hedge funds and savvy short-sellers,” Oanda analyst Edward Moya said in a note to clients this week. “What happened with GameStop’s stock is a reminder of how times are changing.”
David certainly now has Goliath’s attention.
“Starts opening r/WSB with my usual morning tabs,” market strategist Michael Antonelli of R.W. Baird tweeted Monday, referring to the Reddit message board where much of the GameStop action has been coordinated.
Traders on such platforms have been plugging other stocks with major results, too. BlackBerry shares, another fan favorite, are up more than 170% in 2021. They jumped 28% on Monday alone.
Big picture: The wisdom of such trading decisions is certainly debatable. After all, it’s near impossible to argue that GameStop’s value has actually increased exponentially in a matter of weeks. Some gains are also attributable to a so-called “short squeeze,” as those who bet against the stock rush to buy in so they can cover some of their losses.
But once the GameStop dust settles, expect Wall Street’s asset managers to watch where the retail trading hive mind wanders next. Clearly, it can have an impact.
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