It’s happening again.
The markets are way down, but meme stocks are up. One hour before market close yesterday, $GME was holding steady at around $52 per share. Just another hour later, it closed at $91.70, over double what it opened at. Naturally, it opened today at $170, spiked at $177 and closed at $108. What happened last month with the subreddit r/wallstreetbets and meme stocks certainly made history, and it’s already repeating itself.
According to Thinknum’s Reddit tracker, $GME was by far the most-talked about stock on the subreddit today, mentioned 2959 times across the 100 top posts. Trailing far behind, but still occupying the top spots were other meme stocks like AMC, Blackberry and Nokia. Palantir, a recent target stock in the community, followed close behind the meme stocks.
There are many reasons why there could be a sudden increase in the price of $GME, but WallStreetBets is front and center attempting to claim credit. A post titled “If GameStop hits 800 before 2/26 we will trigger the Mother Of All Short Squeezes, read up.” was made early this morning by user KitrosReddit, laying out a plan of action of sorts for the WSB cabal to capitalize on yesterday afternoon’s sudden spike. It quickly became the top post on the subreddit with over 45,000 upvotes and multiple awards from users.
KitrosReddit is a prolific WSB community member, laying out various theories and strategies and even helping develop AI to try and predict the growth of certain stocks. In the post, they argue that, according to an AI model another user developed, $GME was likely to reach $800 before or by February 26. “I believe that the AI-Model of GameStop's share price, which predicts $130k a share, is predicting this because it believes that we will hit 800 before 2/26, therefore causing the Mother of All Gamma Squeezes,” KitrosReddit wrote. “Which will then trigger the infinity short squeeze which sends us to $100k+.”
A Gamma Squeeze is a sort of cyclical process that occurs when buyers purchase an increasingly high volume of options from market makers, forcing the market makers to buy large amounts of stock to cover their risk. This drives up the price of a stock, incentivizing buyers to purchase even more options, leading to the market maker buying even more stock, which makes the price of the stock go even higher, which makes the buyers purchase more options, and the cycle goes on and on until we reach the moon.
Seeing as $GME didn’t go to the moon today, despite increasing 297% since the market opened yesterday, KitrosReddit’s bet that the stock would hit $800 was a lofty one. But that didn’t stop another miniature frenzy from happening on the subreddit and across the internet, and it certainly doesn’t mean that the stock couldn’t rise again tomorrow. Trading of $GME was halted several times today, prompting Robinhood to notify users that the restrictions were coming from markets and not from Robinhood itself.
That finger pointing didn’t do much to help Robinhood’s image, though. WallStreetBets has fully turned on the community, and as Dave Portnoy told CEO Vlad Tenev in a Tuesday interview, the goodwill may never come back. One of the top posts on the subreddit titled “Vlad on his way to commit market manipulation after seeing the $GME price” shows Tom Cruise sprinting at full speed in a Mission Impossible film, and has even more upvotes than KitrosReddit’s thread.
The one-day price chart for $GME is a work of art for WSB users. It’s green, and goes straight up and to the right. But on the whole, today’s happening failed to inspire the kind of frenzy we saw a month ago which caused even those who had never put a cent into the stock market before to download Robinhood and place bets on $GME and other meme stocks.
If retail investors want to push $GME to the moon, they’re facing a vicious cycle just like the one they’re trying to create. Retail investors need to drive a price increase to generate hype to drive a further price increase to generate more hype. They have clearly shown that they’re able to drive the price of a stock way up, but they may only be able to bring it to a certain point before they’ll need to rely on laymen downloading Robinhood in a frenzy to ratchet it up even further. But after last month’s gold rush ended in such a cold fashion, with trading apps restricting purchases and Wall Street lashing out, that frenzy may be hard to stoke up, and the moon might just remain a distant thing they dream about reaching. We’ll see what happens tomorrow.
About the Data:
Thinknum tracks companies using the information they post online, jobs, social and web traffic, product sales, and app ratings, and creates data sets that measure factors like hiring, revenue, and foot traffic. Data sets may not be fully comprehensive (they only account for what is available on the web), but they can be used to gauge performance factors like staffing and sales.