GameStop: How the Online Crowd Stormed the FinTech Scene

by Paolo Gerbaudo

29 January 2021

SOPA Images/Reuters

What do a brick and mortar video games store, Wall Street hedge funds and Reddit – the social news aggregator and discussion website, beloved by nerds – have in common? Very little, you might think. But this week, these three worlds collided in the ‘GameStop Reddit war’ on Wall Street.

At the forefront of this war is the Reddit community ‘WallStreetBets’ (WSB): a rag-tag army of hundreds of thousands of small investors which describes itself as if “4chan found a Bloomberg Terminal”. It’s on this forum – where users discuss market trends, advertise investment opportunities (such as risky ‘out of the money’ options), and coordinate their trading – that users have called for the mass purchase of GameStop shares in defiance at Wall Street hedge funds betting on the collapse of GameStop, along with other retail chains.


Gambling on the bankruptcy of beleaguered companies has recently become a cynical speculation opportunity for rapacious Wall Street firms. A number of retailers including JCPenney department store, the stationery shop Papyrus and the US arm of Le Pain Quotidien were forced to file for bankruptcy in 2020. This year, theatre chain AMC and clothing store Gap are just two of a number of companies on the brink due to a dramatic drop in revenues.

GameStop (listed as $GME) – which was founded in 1984, and has over 5,000 stores across the US, Canada, Australia and Europe – is one firm many thought was bound to fail. Before the pandemic, it’s where gamers would crowd for large video game releases and buy all sorts of collectibles. Like so many other retailers, however, GameStop has suffered from dramatically reduced footfall due to Covid-19.

Since mid-January, major Wall Street hedge funds including Melvin Capital, Point72 Asset Management and Citron Capital have been betting on the fact that GameStop shares would drop. This is what’s known as ‘shorting’, or ‘short-selling’ – as depicted in the film The Big Short which portrays a group of heretic traders who win against all odds by betting against the housing market at the height of the 2000s bubble.

‘Shorting’ is when a trader sells securities (such as shares) that have been borrowed, usually from a broker, hoping to purchase those same securities at lower price later on, to return them to the broker later on. If the share price goes down, the difference is pocketed by the trader. But if the share price goes up, the trader can incur a loss, which can sometimes be significantly greater than the sum originally invested. It’s like playing high-stakes poker without having the money.

This is exactly what’s happened to some of the firms that shorted GameStop and other retailers. They gambled on the share price falling sharply, but the share price has actually gone up, and they’ve been forced to purchase stocks at a much higher price. GameStop stocks have risen a whopping 2,200% since 11 January, when Wall Street started betting on the stock falling. Consequently, Melvin Capital and other firms are now facing losses of up to $70bin, according to Ortex data. Having gambled on retail stores going bankrupt, they themselves are on the brink of going bust.

So how has this happened? Well, small investors have been coordinating on Reddit, and essentially doing the opposite of hedge funds: betting on GameStop’s share prices going up. These traders include small professional investors, at-home traders with garages turned into trading stations, crypto fanatics who’ve entered ‘fintech’ after buying Bitcoin and other forms of e-cash, and middle class hobbyists, who enjoy trading online their ‘play money’ (say a few hundred or thousand pounds).

These people are animated by a range of motives, be they political (taking revenge on rapacious hedge funds pushing companies to bankruptcy) or economic (making money out of a moment of collective investment mania). If tens of thousands of people invest in a stock at the same time, it’s likely that the stock will go up, with huge rewards for some involved – namely, those quick enough to get rid of inflated securities before panic selling begins. But part of the motive is no doubt the adrenaline experienced as part of an online crowd – a crowd who, like 4chan trolls, enjoy humiliating those who think they are untouchable.


The GameStop saga shows the powerful aggregation effect of the internet, and how individual weakness can become collective strength. While investors may have just a few thousands dollars each, if they act in concert, they can harness the same power as hedge funds worth billions. 

The online crowd – already seen in the hacking campaigns of Anonymous and social media-powered protest movements – is now storming the fintech scene. Much in the same way digital activists game the Twitter algorithm to make a topic ‘trend’, small investors are now gaming the stock exchange. This, of course, is only the same as what hedge funds do – and had, until now, assumed to be their privilege. As such, the figure of the online trader – recently seen as a hero of the financialised economy – is being depicted by news outlets such as CNN as dangerous ‘anti-elitism’, putting the very viability of the financial system at stake.

The WSB crowd has earned notable enemies and allies. Endorsements have come from both Alexandria Ocasio-Cortez and Tesla CEO Elon Musk, who in recent months has waged his own war on ‘shorters’. Conversely, Wall Street hedge fund lobbyists are now demanding market regulation to prevent small online traders from interfering with their speculation. Some online trading apps such as Robinhood – whose slogan is “let the people trade” – have even suspended operations on companies such as GameStop, leading users to negatively ‘review-bomb’ the company on Google. 

When share prices go down, the WSB crowd may eventually end up losing significant amounts of money. In the meantime, these fintech trolls have not only humiliated big hedge funds – they’ve shown the irrationality of financial markets, and how the ebb and flow of trading is anything but ‘spontaneous’.

Paolo Gerbaudo is a sociologist and political theorist. He is the author of The Digital Party: Political Organisation and Online Democracy and The Great Recoil: Politics After Populism and Pandemic, forthcoming with Verso.

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