After AMC and GameStop (GME) stocks skyrocketed in January as a result of a short squeeze, students at SIUE are excited about investing despite seeing mixed results with their investments.
When a forum on Reddit called /r/wallstreetbets discovered hedge funds had been short selling AMC and GameStop stocks – essentially betting against a company’s success – they decided to perform a “short squeeze,” which meant they got thousands of users across the internet to invest in the companies and raise their stock prices.
In the span of a week, GameStop’s price grew from $40 to $370 a share and AMC’s grew from $3 to $19 a share. Economics professor Alicia Plemmons said she doesn’t think anything like this has happened before.
“It’s a play that hedge fund managers use against each other all the time. The difference is that this is just your average sort of person that’s doing it this time. It’s not multimillionaires sitting in an office, it’s students,” Plemmons said.
On Reddit, and eventually most other social media, phrases like “eat the rich” were thrown around. Many posters said they were intentionally investing to interfere with the Wall Street professionals profiting on the companies’ failures.
Freshman undeclared major Lucas Hollenkamp of Highland, Illinois, said he invested because he was mad about the state of the market.
“The markets always seemed like it’s always been one-sided, it’s always working out for the people that are already in power. It was more of a middle finger – jumping in on it,” Hollenkamp said.
Economics and Finance Professor Jie Ying said there were a couple of reasons the internet was so quick to collectively invest in GameStop.
“There’s a kind of rebellion … This is kind of a behavioral emotional consequence. Or it is also related to a form of nostalgia regarding GameStop, because many of the users grew up with GameStop,” Ying said.
Plemmons said while many are interpreting the actions as hostile, those who invested are doing nothing wrong.
“A lot of people are treating this almost as a hostile move, but really it’s a novel market strategy,” Plemmons said.
Though many are still holding and buying shares hoping for another spike, GameStop has dropped to $60 a share and AMC to $6 a share. Economics Instructor Laura Wolff said this should have been expected.
“The reality of it is that they overpaid for something. In the end, stock prices do have to reflect the underlying values of the businesses, and GameStop’s business is in big trouble,” Wolff said.
While some profited off the stocks, others ended up losing money.
“People were making it sound like that Friday, the hedge funds were going to be forced into having to buy back their borrowed shares and it would spike the number up to $2,000 … It just kind of collapsed. I sold at $85 I think, so I lost, like, $500 of my money,” Hollenkamp said.
“I sold [GME] at the beginning of the spike and made a good amount of money off of that, but then it skyrocketed even more beyond what I could even imagine,” sophomore economics and finance major Jack Crum of Rochester, Illinois, said.
Despite all that, the students are still happy to be investing.
“The /r/wallstreetbets Reddit forum that did all this – I’ve been a part of it for a while – but I never really got into anything that they were doing because it was straight gambling, but now they have so much power. If they’re getting into something, you could definitely make some money off of it,” Crum said.
Hollenkamp said he has lost interest in individual investing after the event.
“It’s gotten me more interested in mutual funds, but I’ve definitely lost my interest in using apps and doing individual investing like that,” Hollenkamp said.