In early 2021, one rambunctious corner of the internet made headlines not just by making millions, but by turning trading into a movement. Retail investors on Reddit, particularly on the subreddit r/WallStreetBets, invested heavily in shorted companies in order to induce a meteoric rise in their stock price.
Though analysts sneered at the mostly-amateur traders, Reddit users successfully squeezed massive hedge funds and claimed a victory for the common man (and woman) against the malevolent suits of Wall Street (or so their story goes).
The movement’s flagship stock, GameStop, peaked on January 29, 2022 at a price 8,000% higher than the year before, and led to devastating losses for Melvin Capital, one firm betting on GameStop’s downfall.
The success of buying into GameStop led to similar surges in other “meme stocks” that were hyped by r/WallStreetBets users. While stock traders generally “go long” in developing companies with interesting prospects, Reddit investors targeted struggling companies in declining industries, using crowdsourcing as a cudgel against short sellers.
A year later, Wall Street still keeps an uneasy eye on Reddit. While the level of activity surrounding meme stocks has died down somewhat, the r/WallStreetBets rally has had lasting effects on the market.
We decided to take a closer look at the impact by analyzing data from our parent company Thinknum. First, we determined Reddit’s five favorite stocks based on the number of times their tickers were mentioned in the top 100 posts on r/WallStreetBets.
We then combined that data with the stock’s daily closing price and changes in its trading volume to show how Reddit investors shook up Wall Street. Here’s the story of GameStop, Tesla, AMC, BlackBerry, and Clover Health through the eyes of Reddit.
GameStop is the figurehead of the Reddit investing movement, and this chart shows why. GamStop’s volatile price action in early 2021 was matched with an explosion of discussion on Reddit, as users colluded on a short squeeze of GameStop’s stock.
While the hype around GameStop’s rise — and its incredible earning potential — made the price soar in January, it would never reach past its high of 347.5 at market close on January 27th. Analysts warned that although the short squeeze was successful, GameStop was still overvalued, its business model outdated for an age where digital storefronts dominate online gaming.
Nevertheless, Reddit users continued to discuss GameStop at length. Early June saw an increase in GameStop’s price, and a corresponding increase in Reddit activity. However, as 2021 wound on, the hype train lost steam; spikes in Reddit activity in late August and January 2022 weren’t accompanied by the increases in trading volume and stock price that Reddit users were accustomed to.
GameStop, however, is still about thirty 30 times as valuable as it was two years ago. The company turned heads when it hired Ryan Cohen, the founder and former CEO of Chewy, to help the company pivot to e-commerce in January 2021. Cohen has since been involved in reshaping the board and staking out a new vision for the company — the company is now reportedly working towards setting up an NFT marketplace.
Elon Musk has long been a favorite of the tech-y, meme-loving Reddit community on subreddits like /r/SpaceX (over 1.3 million subscribers), /r/TeslaMotors (nearly 1.6 million) and /r/ElonMusk (over 1 million). /r/WallStreetBets is similarly a fan, with Tesla talk leading to its No. 2 rank on this list.
However, Tesla’s stock owes its success to more than just a Reddit-organized short squeeze. As the chart shows, while Reddit discussion of $TSLA has seen several significant spikes, those increases greatly outweigh any increase in stock price or trading volume. The stock has gained modestly since the beginning of last year, but its gains are dwarfed by GameStop’s meteoric rise.
Tesla discussion on Reddit saw two significant spikes: in late October, after Hertz announced its intention to purchase 100,000 electric cars from the company, and in late December, when Tesla announced it had delivered significantly more cars in 2021 than analysts had expected.
While Reddit loves to discuss Elon and Tesla, it’s clear that the stock’s popularity outclasses the purchasing power of the nearly 12 million subscribers of /r/WallStreetBets. After all, the company was the sixth in history to reach a market cap of $1 trillion.
After Reddit’s success in targeting GameStop in early 2021, shrewd users set their sights on another company struggling in a rapidly-changing industry — AMC. Unlike with Tesla, Reddit hype was able to send AMC stock soaring, partially due to similar market dynamics, as short sellers had also bet heavily against AMC.
Despite the pandemic’s catastrophic impact on AMC’s business, with theaters closing nationwide, AMC was able to amass $1 billion in cash in Q1 2021, setting the record for the most liquidity in the company’s 100 year-history. As the stock rose, Redditors celebrated with posts bragging about their 500%+ gains
AMC’s hype mirrored GameStop’s rise — but also its fall. $AMC has declined from its 2021 highs but still managed to post a gain of over 1,000% in 2021, turning the idea of a “meme-stock” from a fad to a phenomenon.
$AMC is also attempting to use the infusion of cash to pivot its business towards emerging markets, announcing last November that it would accept cryptocurrency payments through its online app and distributing NFTs with movie tickets. It remains to be seen whether these efforts will be enough to recapture Reddit’s attention as discussion of the stock on /r/WallStreetBets has waned in recent months.
A business, once a titan in its industry, is struggling to navigate a rapidly-evolving market when its price suddenly skyrockets — does this story sound familiar yet? BlackBerry, like AMC, earned its status as a “meme stock” after Reddit hype sent the stock price soaring.
Though BlackBerry was talked about more at its peak than GameStop, according to our data, that spike was short-lived — Reddit’s interest in the former smartphone titan waned much more quickly than with Gamestop and AMC.
The decline in Reddit’s interest in the stock can surely be attributed to its price, as it’s worth about the same now as it was in January of 2021. However, BlackBerry also declined to play along with the hype. While GameStop and AMC acknowledged their retail investors and are attempting to pivot their businesses towards emerging technologies, BlackBerry executives used their stock’s rise to cash out instead.
5. Clover Health
If you haven’t heard of Clover Health, perhaps you’ve heard of one of its biggest backers: venture capitalist Chamath Palihapitiya. Palihaptiya has become known for taking companies public through SPACs, which have also found success courting retail investors.
Palihapitiya took Clover Health public via SPAC in June 2021, and in a familiar narrative, Reddit’s interest in the heavily shorted stock sent the price soaring. Compared with BlackBerry, Clover retained some interest among Reddit users, though its price has similarly trended downward, with shares currently worth about 7% of their all-time high.