‘We Don’t Want Socialism’: How WallStreetBets Rejected the Left
by Jack Chadwick
3 February 2021
Last week a construction worker named Zak in Sioux Falls, South Dakota, took a break from his eight-hour shift in the snow. With his free ten minutes he opened the mobile Reddit app to draft a quick post to WallStreetBets — the community of amateur investors that last month committed to one of the highest stakes ambushes on American finance in the sector’s history.
Every few minutes whilst typing, Zak would switch to check his portfolio on an app for buying stock. The post he published at the end of his break proudly told the forum how he’d “scraped enough together” to buy 348 shares in the old brick-and-mortar video-games retailer GameStop. He’d spent his savings, $27,000, buying stock at £80 a share. He was certain, as were his Reddit comrades — all of whom were also frenziedly buying — that by the end of the week his shares would be worth $500 each. The money he could make from selling them would be enough to buy one of the suburban prefabs he’d spent his working life building.
The post is being read to me over the phone by another WallStreetBets devotee, James, an NHS porter for a big Manchester hospital currently run into the ground by the pandemic. “Wanting in,” James tells of how he’d emptied his wage packet onto a trading platform, buying 10 shares for $87 each.
Overnight their value had doubled, but neither he nor Zak, nor their thousands of fellow acolytes, dared to sell yet – two drivers, greed and loyalty, were stringing the predominantly young and male demographic of WallStreetBets together, further cemented by their burgeoning disgust for the hedge funds they were hoping to rinse. The forum’s users never stopped reassuring each other: the longer they stuck together and held-off from selling, the bigger they all could win. As their shares rocketed in value, they each feverishly refreshed their trading apps and the subreddit. Every new development was soundtracked by the cacophony of its Discord server.
Frenetic stream-of-consciousness mega-threads asked the people of WallStreetBets how they’d each spend their eventual gains. Wipe my student debt, buy a boat, buy a home, buy multiple homes. On one of these threads, a user spoke of “YOLOing” his father’s life-savings into GameStop shares. “It’s either retirement on a yacht or food stamps for him.”
‘Power to the Players.’
“Gamers by nature,” it’s been suggested that WallStreetBets’ hundreds of thousands of active users were first drawn to the GameStop stock by their fond memories of the old mall haunt. Over three or so months to January, this fondness for the brand was laundered by an experienced subset of the forum into a high-stakes plan to ‘pump’ the company’s share price. The wider forum community were convinced and corralled by the potential for every user to apparently make huge profits, a gambit laid-out in meticulous detail by the experienced subset, users operating on a mixture of shrewdness, nostalgia, and awe for Elon Musk.
Among this subreddit elite was the user /u/Jeffamazon, who in October published plans for the ambush now quaking Wall Street. Hailed by the forum as “a feat of Adderall”, the hairsplitting degree of detail in his post was incommensurate with the relative simplicity of the proposition’s basic idea; the only real objection from other forum users was that the plan was, in fact, “too retarded to actually work” — too simple, in politer terms.
When GameStop adopted its now prophetic slogan of “Power to the Players” in 2007, the company was in its heyday. Queues for every big new Xbox 360 or PS3 title kept the company’s stock trading at around the $60 mark. Since then the bloodletting of their profits by online retailers and the massive gaming platform Steam, abetted by the pandemic, resulted in a record low of $5 for its share price last July.
The ‘zombification’ of brick-and-mortar retail firms has long attracted the attention of a vulture faction of finance: short-sellers. Made in America, the practice of shorting a stock is deeply counter-intuitive — it offers a way of making money from investing in a business that you expect to do badly. The classic strategy begins with copious amounts of research on the part of the investment fund doing the shorting, tantamount to investigative journalism. A fund’s researchers pour over the financial statements of public companies to try and find the weakest members of the herd, uncovering as yet undiagnosed pathologies in a company’s performance by way of its balance sheets. Often this research stage would involve coordinating with actual journalists, or panning for hearsay among a company’s employees – this the shorters call ‘fieldwork’.
If an under-publicised weakness is found in a business, the short-sellers then use Wall Street connections to set-up an odd kind of deal with another financial institution where their fund borrows shares in the stock of the company with the weakness, in exchange for some collateral, usually in the form of cash.
The fund then hastily sells the shares that they had only just borrowed. After, its staff start on the most heretical stage of their game, the part that has earnt this faction of finance its black reputation among traders and the corporations whose stocks they go after. For the short-sellers to make money, the value of the stock they had just borrowed and then sold must fall so that the fund can buy it back at a lower price, pocketing the difference before returning the shares to the original lender in exchange for the original collateral. Huge profits can be made.
To help lower the share price of the companies being shorted, many of the funds behind these manoeuvres embark on campaigns to spread awareness of the weaknesses they had uncovered in their target companies. The dissemination of this damning information can lead normal investors to pull-out en masse, precipitating a fall in the value of the company’s shares after which their price would, the shorters argue, more accurately reflect the true value of the stock to investors. The damage done to the value of a company’s shares can be so total as to wipe them out completely, as happened most notoriously with the gas giant Enron. The firm was forced into bankruptcy in 2001 through the actions of shorters.
‘More to do with the firm’s capacity to sell itself than its cars.’
In 2018 a leading short-seller, Andrew Left, turned his attention to Elon Musk and Tesla, whose parabolic rise Left convincingly argued is the work of smoke, mirrors and Musk’s PR machinations. The success of Tesla, it is claimed, has had more to do with the firm’s capacity to sell itself than its cars. In 2020, Tesla overtook Toyota to become the most valuable ‘car-maker’ – despite making only 300,000 vehicles a year, compared to Toyota’s 11 million. Left’s research outfit, Citron, moved to publicly denounce Tesla as “a new Wall Street casino”.
For the amateur investors of WallStreetBets, this was profane. A slurry of takes in response to the forum’s January antics have so far framed its user-base as regular (if weird) young men rounding on Wall Street in a David versus Goliath gamble. Comparisons to Occupy have flooded Twitter. For their part, the forum has happily taken-up the anti-establishment mantle. But thread after thread of discussions reveal that the strength of their disdain for one branch of finance capital is surpassed by the strength of their sycophancy toward another: Musk is an almost messianic figure among the forum’s core users.
It was Andrew Left’s targeting of Tesla in 2018 and again in 2020 that moved WallStreetBets towards the anti-short ambush now coming to a head.
u can’t sell houses u don’t own
u can’t sell cars u don’t own
u *can* sell stock u don’t own!?
this is bs – shorting is a scam
legal only for vestigial reasons
— Elon Musk (@elonmusk) January 28, 2021
A few months ago, Citron led a charge of short-sellers against GameStop, “a failing mall-based retailer”. Left’s firm published research concluding, quite fairly, that the company had been doomed by insurmountable online competition. Few would disagree, even among WallStreetBets. The research from Left’s firm sparked a number of funds to open an enormous amount of short positions against GameStop stock.
Malice towards Left for his Musk-realism marked him out as a target for retribution, and the hardcore of WallStreetBets — going right back to the /u/jeffamazon post in October — spotted an opportunity to disrupt the short-selling of GameStop by Left and others as it was in full swing. If instead of the share price falling, as Left confidently predicted, the price actually rose, then the shorters would be caught out in the rain, at the most vulnerable junction in their strategy. The agreements with the original lenders of the shares meant that they had to buy back the stock in order to return it, but they would, because of the ‘pumping,’ now have to do so at a much higher price — potentially bankrupting the bankrupters.
‘We don’t want socialism.’
This is unacceptable.
We now need to know more about @RobinhoodApp’s decision to block retail investors from purchasing stock while hedge funds are freely able to trade the stock as they see fit.
As a member of the Financial Services Cmte, I’d support a hearing if necessary. https://t.co/4Qyrolgzyt
— Alexandria Ocasio-Cortez (@AOC) January 28, 2021
The Redditors of WallStreetBets have been forced to clarify their politics to the wider world after winning the support of socialists, most notably Alexandria Ocasio-Cortez. The left have been rightly outraged by the blatant corruption of initial efforts to shut-down the forum’s offensive. But the decidedly reactionary politics of WallStreetBets prevent its devotees from looking kindly on this support. “We don’t want socialism. Just give us a market that isn’t corrupt,” a Twitter user heavily associated with the forum said last week.
We don’t want socialism. Just give us a market & government that isn’t corrupt.
— The Chairman (@WSBChairman) January 28, 2021
Fundamentally the forum sees short-sellers like Left as enemies of American capital — and themselves as its saviours. They want to run short-sellers off Wall Street, but only to take their place. Profits gained on the GameStop gambit will be ploughed back into Tesla and the stocks of other heavily hyped, financialised tech transnationals.
WallStreetBets is awash with false modesty. Zak’s post, in which he claimed to be “just a construction worker,” provoked a comment from an acquaintance in Sioux Falls, who knew the man: “just a construction worker?” It turns out that Zak is, in fact, the heir to a house-building company with 50 employees. While working-class people have attempted to get in on the scheme, like James the hospital porter, their engagement has been dwarfed by the ‘whales’ of WallStreetBets, the petit-bourgeois users who dominate the forum, with the financial security to bet massive amounts on a meme.
With many hedge funds rallying to join the Redditers in the gambit it became a case of “one big group of small speculators winning against a small group of big speculators,” as Tony Norfield puts it. Norfield, a former banker and now the preeminent Marxist analyst of finance, is author of The City. For him, the short squeeze was “amusing, yes, but not much use as a morality tale of good versus bad”.
A realisation almost as counter-intuitive as the practice of short-selling itself is that, in fact, some shorters make more natural allies for socialists than other factions of finance capital. Shorters’ assaults on companies have sometimes overlapped with our own actions against the firms, as was the case a few years ago when a piece of research, sponsored by Bernie Sanders, into medical price-gouging by a pharma company was picked-up by Citron to destroy the company in question.
Karl Marx himself played the London Stock Exchange of the 1860s in a similar way to early shorters: that is, by trying to make a quick buck from his criticisms of capital — “it’s worthwhile running some risks in order to relieve the enemy of his money”. Unfortunately in the case of the GameStop saga, it’s hard not to see both the squeezers and the “squozed” (in the parler of WallStreetBets) as our equal enemies — with the financial imperialism of Wall Street on one side and the local tyrannies of small capitalists like Zak on the other.
James was however able to win enough for a holiday, the hope of some relief from his pandemic-hit hospital. And inside this bust-up between capitalists big and small was an important opportunity for workers like him to see behind the curtains of finance capital.
Jack Chadwick is a Manchester-based Marxist political economist.