GameStop rebels take on wolves of Wall Street

Will the GameStop revolutionaries win in the end? Activist small investors have beaten the big hedge funds at their own game. But some say the share-buying frenzy will end in tears. There is mayhem and fury on Wall Street. Last week, panic-stricken stockbrokers strained to keep up with the frenetic activity on the stock market. In boardrooms, horrified hedge fund managers watched as billions of dollars were wiped off the value of their company. Something new and terrifying was happening. And behind it all: a struggling videogame store, an online forum and a billionaire’s tweet. Last year, a share in GameStop cost less than $3. Last week it peaked at $469. Soaring stocks are usually good news for big business. But by the normal laws of economics, GameStop’s share price should not be booming. The pandemic has hit high street retailers hard and the shop has been forced to shut stores and lay off workers. In fact, Wall Street was betting big that GameStop was doomed. Hedge funds make billions by borrowing stocks, selling them and buying them back when the price falls. It is called shorting and it is very controversial. The funds say they are protecting their clients. Critics call them wolves and vultures, preying on the weak. Last year, amidst a global economic crisis, they made $127bn. And online, a rebel alliance is plotting to beat these big financiers at their own game. WallStreetBets is a community of amateur traders on the social media site Reddit. And they are out to cause trouble. By buying cheap GameStop shares, they aim to squeeze the price higher and watch triumphantly as the uber-rich lose their money. “Let’s bankrupt these billionaires and hedge funds!” wrote one user. They are calling it a digital Peasants’ Revolt, a bottom-up rebellion against the wealthy. One small trader walked away with $23m. Another wrote they could now afford their sister’s medical bills. And last Wednesday, the entrepreneur Elon Musk raised the flag for the GameStop revolution, tweeting “Gamestonk!” to his 44 million followers. The battle cry sent stocks soaring into space. But after the revolt comes the crackdown. Facebook shut down a group linked to the GameStop traders, and stockbrokers limited how much these small investors could buy. Politicians on both ends of the spectrum joined the rebels’ cause, as the financial system pulled up the drawbridge and prepared for a siege. Economists warn this will all end badly. Like the tulip mania of the 17th Century, GameStop is caught in a stock market bubble. At some point, reality will catch up with the wild speculation and the share price will tumble back to Earth. Anyone holding GameStop stocks will lose all their money. So, is it game over for the revolution? Don’t bet on it, says business professor Scott Galloway. Income inequality will always be corrected by “war, revolution, or famine” and “These individuals basically stormed the castle.” They used new weapons and took financial elites by surprise. Even if they lose this time, they will be back. Will the GameStop revolutionaries win in the end? Gaming the system Some say no, all revolutions end in failure. Ringleaders are punished and ordinary people pay the price. The super-rich control the financial and political institutions, giving them an overwhelming advantage over amateur investors. And as tech giants like Google and Facebook take over the Internet, it will become harder for groups to organise against the system. Others say yes, if you take the long view. Feudalism was not overturned by one revolt and democracy was won over centuries of protest, struggle and revolution. An economic system that makes billionaires richer during a pandemic and a global recession cannot last. Like the storming of the Tower of London in 1381 or the Bastille in 1789, this is a symbolic moment when the powerful no longer appear invincible. KeywordsElon Musk - A South African-born entrepreneur whose companies have included the online payment service PayPal.