WASHINGTON — Remember the GameStop stock madness on Wall Street? In January, the video game retailer’s stock shot through the roof.
The story was millions of people got together on social media forums like Reddit and banded together to drive the stock up. Or so it appeared.
Question:
Did individual investors alone boost GameStop’s stock?
Answer:
Not exactly. Wall Street trading statistics show investment banks and hedge funds were involved.
Our Sources:
J.P. Morgan Chase January Retail Trading Statistics and Peter Ricchiuti, a stock market expert from Tulane University.
What We Found:
We were told the GameStop stock’s wild ride was set off by people like Kyle Heflinger.
“Here's a whole bunch of people excited about it and figured, ‘What the hell! I'd join in,’” the University of Maryland junior said.
Heflinger joined the Reddit and social media legions that drove the Game Stop stock from $19/share to $347/share in two weeks.
“It was exciting and kind of amusing,” he said.
This was the story: An army of individual traders, just like Kyle, investing in a dying stock to take down a big Wall Street hedge fund. Millions of Davids vs. Goliath. At least that’s what we thought.
It turns out that might not have been the whole story
“It became more apparent at the end of the week that this was a bigger picture thing,” Heflinger explained.
No one doubts that social media like the Reddit forum, ‘Wallstreetbets’ boosted the profile of GameStop’s stock.
But here is what is peculiar.
This month, investment bank JP Morgan Chase released the Wall Street statistics of individual traders in January.
Guess what?
Despite all the hype, GameStop didn’t even crack the top 10 for most bought stocks for individual investors.
This means part of the stock’s rise came from institutional investors like investment banks and hedge funds.
“So instead of the Reddit crowd, pushing as a short squeeze, it was actually hedge funds coming in and wanting the same thing,” Peter Ricchiuti explained.
According to several financial reports, one of those hedge funds made $700 million off of the stock’s rise.
What looked like a David Vs. Goliath’s Wall Street story instead looks like David might have had some help from another Goliath.
“It seems to be more of a rich man's game than the whole retail investing thing that they want people to believe it is, in my mind,” Heflinger mused.
It might not have been the retail trader revolution it was made out to be, but Kyle Heflinger said he walked away with some new lessons from Wall Street.