From the file

WallStreetWins | Wall St has been braced for the big one; a moment of real disruption that changes the financial world forever. Some people thought Gamestop was that moment. Was it really?

Fairy tale finance

Fairy tale finance

A myth has been made: a tale of wolves on Wall St; a pack of principled amateurs biting the legs of greedy financial giants and bringing them down. But almost everything you think you know about wallstreetbets, GameStop and Robin Hood is wrong.


transcript

Basia Cummings: Last week, the forum Reddit – the website that calls itself the “front page” of the internet – crashed the Super Bowl. 

Where other companies spent millions on slick ads, Reddit made a cheap one, in a week. 

It flickered and glitched onto the on screen for about 5 seconds, and it hit a home run… and I know, yes I know, that’s the wrong sport, but still you get my point – it worked, it went viral. 

And it sent a really powerful message. 

The ad read: “Big game spots are expensive, so we couldn’t buy a full one. We were inspired and decided to spend our entire marketing budget on 5 seconds of airtime. One thing we learned from our communities last week is that underdogs can accomplish just about anything when they come together around a common idea.” 

They were, of course, referring to GameStop – the remarkable story that just a week before had crashed not the Super Bowl, but the news. 

A bunch of Reddit users seemingly got together and took on a big hedge fund. They clubbed together to send the share value of a struggling video game chain stratospheric. This, in turn, caused a multi-million dollar hedge fund – in their eyes, the bad guys – to lose a lot of money.

The reddit ad finished by saying: “Powerful things can happen when people rally around something they really care about. And there’s a place for that. It’s called Reddit.”

It was a masterstroke of storytelling – but that’s all that it was. 

It’s a story not borne out by reality. 

I’m Basia Cummings, and in this episode of the Slow Newscast, I’m going to tell you about why this story – packaged up as a battle of underdogs vs titans, Davids v Goliaths – is the wrong story. 

To help me, I’m going to bring in two of my colleagues – the investigative journalist James Ball, and data reporter Kim Darrah who have spent the last week sorting fact from fiction. 

And the story I want to tell you is more revealing about financial markets, and how they work. The story I want to tell you is how big hedge funds profited from a moment of frenzy; how experienced amateur traders and total newbies got caught up in it all, and how… in the end… the house always wins. 

….

So who are our characters in this fable of Reddit hype and stock surges? Well, if Reddit’s version of events is to be believed, it goes something like this…

You’ve got this forum packed with little guys, valiant small-time investors, everyday Robinhoods. They’re young, they’re very on the internet, and after the pandemic hit… they had a bit more time on their hands. They’re on a forum on Reddit called WallStreetBets, and they share financial tips and analysis, a lot of memes, screenshots of what they’re up to. It’s a proper community – like a lot of subreddits are. 

And then, let’s keep up this fable analogy, you’ve got the ailing princess. That’s GameStop – this beloved chain of video game shops selling consoles and all the other stuff you’d need for gaming.

[Audio clip: GameStop]

The kind of place I probably would have gotten very excited about around 2000, when I was playing a lot of Crash Bandicoot on my Playstation 1, but that was a long time ago.

And then you’ve got RobinHood, a free trading app that lets investors trade stocks, options and cryptocurrency without paying commissions or fees. It’s one of the only places offering free trades – and it billed itself as “democratising trading” – and we’ll come back to that later. 

It’s an app that makes it easy for the valiant little-guy traders to throw their hard-won gold at GameStop, as they’re all telling each other on the WallStreetBets forum that they can save it, or at least, make a stand. 

[Audio clip: RobinHood]

And then you’ve got the baddie: the big bad hedge fund, Melvin Capital. Based in New York City, and founded by a man called Gabriel Plotkin who the Financial Times describes as a “low-profile but aggressive trader” who “had a reputation for punchy short positions.” His fund, Melvin Capital, was running two of the five biggest short positions in Europe last month, for example. And I’ll explain in a moment exactly what that means.

[Audio clip: Gabriel Plotkin]

So that’s our cast. But what’s our story? 

Well, it goes like this. 

In August last year, Melvin Capital put in a routine filing – one that hedge funds have to make every 3 months, a 13F form. It listed all the positions that Melvin Capital held at that time – shareholdings in brands like Microsoft and Amazon and Crocs – those horrid but very comfortable shoes. 

But then, a Reddit user noticed something else… they spotted that Melvin Capital had bet on GameStop’s share price going down. It had taken a so-called “short position”. And a big one, that had left it quite exposed. 

And this is where it gets really interesting. Other people on Reddit also noticed Melvin Capital’s short position. And so, together, they decided to get together to squeeze Melvin, to drive the share price up so much that the big hedgefund’s bet on the share price dropping became untenable. 

GameStop’s stock was trading as low as $10 in September 2020, but by 27 January, just a couple of weeks ago, it was at $347 a share. And remember, every dollar that stock went up, Melvin Capital’s position got worse.

In six months, half of its $13bn fund was wiped out.

And when this story hit the headlines, the narrative was quick to stick. 

[Audio clip: montage of news clips that reference David versus Goliath] 

Elon Musk got involved. He tweeted: “GameStonk!!” with a link to the WallStreetBets forum– ‘Stonk’ being how the redditors talk about stock. Musk’s tweet, liked more than 250k times, was like a match at a gas station. 

It all took off.

It was a story that was just so neat, so perfect – of course it was irresistible. 

James Ball: You know two weeks ago this was a man bites dog story, a David versus Goliath story. It was how a plucky gang of redditors, possibly motivated by a desire to take on the system or get revenge for the financial crash, took down a big hedge fund and made a fortune kind of pumping this stock.

Basia: This is James Ball, one of my colleagues who has been digging into this.

James: Given how many games you can buy online and all of that at the moment, it’s been a share that’s been in the doldrums for a long time. It’s been a company people have wondered whether it would collapse.

And so its stock price has been pretty low. And what kind of happened, and this actually started a few months ago, was people making various cases that, hey actually, GameStop’s undervalued, it’s worth more than people say, they can probably pull through. It’s still got a viable business to it. And those really amped up in the last months because a major hedge fund had taken a huge short position on GameStop.

And that’s essentially a bet that a company will either fail or its share price will crash even further down. But you do it by borrowing and selling shares, which means at some point you’ve got to buy those back, hopefully really cheaply so that you make money. And people had seen that this sort of critical date was coming up for a hedge fund called Melvin Capital.

And that sort of gave them a chance to go, hey, no matter what the price by this date, this hedge fund is going to have to buy millions of shares of this company – why don’t we try and squeeze them? Why don’t we try and make that really expensive for them? And that’s kind of what drove the spectacular increase in this stock from sort of about $10-$20 to $50 to $100 to $200 to $300 and beyond.

Basia: And over on WallStreetBets, the community was really getting hyped over this. And they were using a whole new language to talk about what they were doing. Things like YOLO trading accounts (high risk, large value trades) using the acronym for “you only live once”, SOGU (stocks only go up), diamond hands – holding on to your stock til the bitter end. Tendies, my favourite, as in, chicken tenders, meaning profits… 

And then, just as quickly as it inflated, it deflated….the bubble burst. 

And that brings me to 28 January. A pivotal day in this modern day fable. The day that everything came crashing down. 

So I asked Kim and James: let’s see if we can find out who was really making money out of this GameStop fable. Yes, it’s true that Melvin Capital lost a lot of money. But not everybody was caught out…. 

[Audio clip: Mohammad and Basia greeting each other]

That’s Mohammad. He’s one of the little guys. Except, he’s not. But, not quite. 

He’s a WallStreetBetter. He teaches financial management at Sheffield University Management School and he used to be a banker. 

And when I spoke to him, it was immediately obvious that Mohammad isn’t quite what we’d been told to expect from a Reddit bettor. 

Mohammad is precise and he’s really knowledgeable about trading – and he’s brilliantly reflective about what happened – and what happened specifically to him.

Mohammad: So far as investing is concerned I have been doing it, and I do believe you find a good investment where you believe that it’s going to do well in the future, buy it, leave it aside and forget about it for the next 10 years, you will get much better return. Since 2017 onwards I had a bit of liquidity in my hand. My portfolio had been doing well.

By “a bit of liquidity”, Mohammad means – he had a bit of cash going spare. So he got involved on WallStreetBets. And like loads of other Redditors, he was really excited by Tesla – the electric car company, run by Elon Musk. And he says it was a lot of fun. 

Mohammad: I think there was a lot more of the fun element that was definitely there, but since you asked that question, it does give you – think about it. You put in two and a half, say £700 in one of the options in Tesla, the price moves from $300 to $500 and you end up with $5,000 in your pocket in two days’ time.

That definitely gives you a lot more, and I think that those few successes in the beginning is what made me care less when I went into GameStop at a very high rate. Normally I think if I would have been thinking with my hats two years ago, there is no way I would touch a security like that. But I did that. 

Basia: You did that because you’d had some good experiences and Tesla had sort of maybe lured you into a false sense of security. 

Mohammad: I think more was the justification in my mind was I’m not playing with my own money. I’m playing with the profits that I already have made. There’s no difference between the money that I have made from the profit and the money that I earned from my salary. It’s my money at the end of the day. And anything that goes out of it is a loss for me. But somehow in my mind that justification was very strong. And it’s quite behavioral, I will say rather than being rational, but it did happen to me. And I think that is something that can definitely be quite a strong pull for a number of people.

Basia: When Mohammad joined the WallStreetBets forum a couple of years ago, he says it was more of an expert community. People on there really knew their stuff… they knew the market well. And it felt open, transparent. People posted tips and analysis, but they also posted screenshots of their own trades. Mohammad said he felt like he knew the people around him had skin in the game, and he liked that. It felt, honest, somehow. 

Mohammad: When I joined around two years ago, it was a good community. It was a very knowledgeable community. And despite what you think about young traders, they were very experienced people. People with very, very deep pockets. It was very common to see more than a million pound position being taken and people posting why they are doing it. And it was not one in a blue moon. It was happening every month, every week from £100,000 to £1,000,000 positions were very common. There were definitely a few people with maybe £2.5-3 million positions as well, but they were rare. So, no, it was not a group of 17 year olds living in their mum’s basement.

Basia: And then Mohammad said something that made me sit up a bit straighter. 

Mohammad: The analysis that people were posting, that involves that people had access to very serious data systems. There were screenshots from Bloomberg. There were screenshots from the Financial Times database. Bloomberg for your information requires around £16,000 a year, just for one terminal. And it’s an expensive dataset.

Basia: I’m just going to jump in here, because this was when my ears pricked up. Mohammad’s saying that people on Wallstreetbets had access to professional trading terminals. They cost tens of thousands of pounds a year to license; more than any amateur day-trader could possibly afford… 

Mohammad: So it was not just people posting memes, the analysis that used to come there had serious value in terms of information, and distributing it to a very wider population. I learned how to pull in, sorry, pull out data related to a number of trades that have been done from the New York Stock Exchange from the London Stock Exchange. They publish all that data, but most people don’t even know that it exists and we have access to that. 

Basia: Would that suggest that there were people on that forum who were perhaps shaping the conversation or suggesting things who had a vested interest, who were working in the world of finance and who might not have been, you know, I don’t know if the right word is amateur, but people who were sort of gambling with their own money.

Mohammad: Yes, there is definitely a chance to that. 

Basia: This was really interesting. James and I had talked about how we thought this narrative – of little guy versus big guy – was unrealistic and too neat. And here, Mohammad was talking about really, really expensive dashboards, usually accessible only by the kinds of people who work in the world of finance. 

So I asked Kim, my data journalist colleague, to see if she could find out how frequently terminals appear on WallStreetBets – and it turns out it’s quite a lot. And there’s an interesting crossover, too… 

Kim Darrah: One thing you can do is search a sub-reddit, so we can just search WallStreetBets for every time something’s mentioned. So I just went through and I searched Bloomberg terminal and there’s absolutely loads of hits. So it’s been mentioned at least 3000 times in just comments in passing, but you also see posts where people actually just take pictures of Bloomberg terminals along with some sort of comment about the stock that they’re trading or whatever.

There’s something else that sort of points towards the idea that people who are genuinely in the finance industry are also in WallStreetBets. There’s another subreddit called Financial Careers, which is dedicated to people talking and planning their careers in finance and there’s a fair bit of crossover between the kind of people who are in WallStreetBets and people who are active in that sub-reddit.

So we found that of the sample of our top posters in WallStreetBets one in 20 of them had also commented in Financial Careers. 

Basia: It seemed to suggest that – while we couldn’t say that Goliath himself is on WallStreetBets, that financial institutions were manipulating the conversation, encouraging people to make trades that… might not work in their favour. The presence of terminals might suggest people who know Goliath are on there. That the distinction between Reddit and the world of finance they were railing against wasn’t a clear one at all. 

James: So I expect to most of us a Bloomberg terminal doesn’t mean very much. If you’re in the world of traders, if you’ve got a Bloomberg terminal, that’s like your way of going, I am a big effing deal.

I think people tend to want these online groups to either be full of really naive rubes or sort of something completely odd. I think WallStreetBets was a mix of things. So a Bloomberg terminal costs about $15,000-$20,000 a month. These are not something for a small enterprise or for an amateur trader.

So if you’ve got a Bloomberg terminal and you’re posting screenshots from it into this group, that is a very, very strong signal that you are a professional trader, probably working for quite a major sort of hedge fund or financial institution. So there are definitely for a long time, there are some professionals hanging out in this forum.

There will, of course, be some people who don’t really know what they’re doing and have a few thousand sort of dollars and are dropping it as a hobby. And then there are a lot of people like Mohammad who actually know quite a lot, they’re pretty sophisticated operators. They might usually have quite strict rules on when they will and won’t invest, but they’re not in the club.

And you know, we’ve known for sure that professionals use WallStreetBets. Or are involved in it because one of the guys who was most keen on boosting GameStop was a guy called Keith Gill, who’s given his real name and said that he was doing it and seems quite sincere in what he was doing.

And we know that he’s a regulated broker dealer. So he’s not a big player. But he’s definitely a professional trader.

Basia: Which leads me to the obvious next question, which is – so who really are these guys? 

Mohammad thought it was possible that there were some hedge funders in the forum, stoking the frenzy. James isn’t so sure. I called a friend of mine, who works for a big hedge fund. I asked him what he thought and he said that the view that everyone on WallStreetBets was totally amateur was definitely wrong. These were some really serious guys on there too. 

James: I’ve talked to quite a few people this week and every one of them said there will absolutely have been hedge fund traders in there and paying attention to it. And maybe even some of them posting and boosting it. What gets really difficult is to know at what point does that turn from you giving your actual view and following your trades to manipulation. If you are saying, “buy, buy, buy, this will go to the moon diamond hands” and you’re still buying, that’s probably okay. Where it gets tricky is if someone is going, “buy, buy, buy, hold it”, while you’re secretly selling it off. That would probably put you in a lot of trouble. But, you know, if you’re buying and buying and buying until you know that this short squeeze is over and Melvin Capital has managed to close its position, you could go in a second from saying buy, buy, buy to shutting up and quietly selling your stuff while everyone else is still boosting. So there’s, you know, there’s a grey area the size of a planet.

There’s quite a lot to balance because what happens in here is, there’s sort of this question between, even if you’re regulated, you could say, I recommend this stock and I think it’s worth buying. Versus being able to say, hey, this stock’s amazing, gains, gains, gains, it’s gonna go up 400 per cent. And you know, this professors’ view that I spoke to, Professor John Coffee, he was sort of saying actually, if the regulators want, they can take action against that kind of stuff on Reddit, on Twitter, wherever it happens, if they want to, because what seems to happen in this mix of amateur, semi-professional and professional investors is they seem to be able to create these atmospheres that really amp everything up to 11 and have perhaps even usually really measured and serious people lose their heads and then losing their money.

Basia: Now take the user RoaringKitty, for example. Real name, Keith Gill, who was a GameStop evangelist on WallStreetBets from a long time ago. He encouraged thousands of redditors to join him in buy GameStop shares – and it all made his pretty eye-wateringly rich… at least on paper. A picture he posted on the forum showed his GameStop investment was worth around $48 million – but I have to say that number hasn’t been verified. 

But now, the regulators have come knocking. Because in his day job, RoaringKitty aka Keith is a registered securities broker, and before that he worked at an insurance company based in Boston – for a lot of the time he was posting on WallStreetBets. It’s not clear whether he broke any laws – but his former employer, the insurance company, said if they had known what he was doing, it would have been grounds to fire him. 

And on the other side of accounts like RoaringKitty’s hype, was someone like Mohammad. Calm and measured, he understood how the markets worked, and how the forum operated. But as he admitted, even he found it difficult not to get swept away in the excitement of everything going on.

Mohammad: It was exciting, I’ll say I won’t lie. I will say there were a number of decisions that I made, which were completely not rational. Definitely, no. And that was because I was definitely caught up in the moment, looking at it and by the numbers that we had seen. I was definitely planning to sell my shares close to 550-600 points.

And there was no way that shares would not have gone that far on the day. The moment they start clamping down on buying, that’s something we had never, I had never seen before in my life. That a broker or a clearing house or an exchange stops only purchase of a share. There are circuit breakers, that means they will stop trading if it becomes too hot. But that was something that was unheard of and they still allowed you to sell your shares. And that confused me a lot. And that led to some decisions that I’m not very happy with myself. But that was something that I do not agree with. 

Basia: Mohammad’s talking about that big moment, on 28 January, the moment that changed the game – and helped cement the narrative. 

RobinHood – the app a lot of these people on Wall Street Bets were using to make their trades, which allows you to trade without paying fees – stopped allowing investors to buy shares in GameStop. 

Instead, anyone who held GameStop shares could sell them, but nobody on the app could buy them anymore. 

The effect was almost instant.

Gamestop’s shares plummeted. 

They lost half their value in early trading. 

One of RobinHood’s big backers was a hedge fund called Citadel Securities, which had injected money into the already burnt Melvin Capital hedgefund. It looked to the Reddit guys like the big players were colluding, helping each other out, while they were frozen out, with the share price plummeting. 

RobinHood say they had to stop allowing new users from buying into Gamestop, because such was the volume of transactions happening that if something went wrong, RobinHood no longer had the financial collateral to cover this. In fact, they had to raise a further $3 billion from investors just to allow them to keep trading.

Suddenly, RobinHood was at the centre of a storm. It wasn’t just Mohammad and Wall Street Betters angry at them, politicians suddenly on both sides of the divide lined up to criticise the brokerage app, from Alexandria Ocasio-Cortez through to the Republican Ted Cruz.

[Audio clip: Alexandria Ocasio-Cortez]

The right to trade freely suddenly became tied up with… democracy. After all, RobinHood’s tagline is “We are all investors” – and it says it’s “on a mission to democratise finance”. 

And it’s important here to understand how Robinhood works, too. RobinHood doesn’t charge commissions to the people who are using its app, instead it makes money by selling information to big trading outfits – like Citadel Securities and others. So that automatically puts small investors second in the queue – and it’s just another example of how the odds were always stacked against the retail traders on Reddit. 

I wanted to better understand, beyond the terminals, who the WallStreetBettors really are. 

So I asked Kim to analyse the data she could glean from the forum. 

She said the data points quite clearly to the fact that the forum had a big influx of new people around March last year… 

Kim: So we do know that if you look at just like the number of subscribers on WallStreetBets, we do see that there was a bit of an uptick, sort of around February, March, April in 2020. It did suddenly get a lot more popular in 2020. And so that sort of maybe confirms this idea that people flocked to it when the pandemic hit. 

Basia: Her analysis shows that around 300,000 people joined the forum in 2019, but in 2020, it was more like a million.

Mohammad had also noticed a change on the forum…

Mohammad: I think the membership started picking up sometime in the middle of last year. Very, very fast. And we started seeing a lot of posts where people have taken positions in a very risky manner. When I say risky manner, you have $10,000 and you are putting all of it in one stock. There is no way any sensible investor or trader will do. That’s putting all your eggs, that’s against the basic one-on-one-off investing or trading.

I think there’s this fantasy when a small guy fights against a big organization and kind of wins. Practically, we were all doing what those hedge funds were doing. We’re not that different were we? They were doing in billions, we’re doing in thousands, but we were taking short positions, we were selling options, we were doing risky things in the market, which may have a large amount of value from our individual portfolio as well.

Basia: When did you start noticing that something crazy was going on? When did you start like, what was the point, was it a month ago? Was it a couple of weeks ago? When did you start to get that feeling that, hang on, this is going to go a bit sour for lots of people on this forum.

Mohammad: Around November, December, late, November, December last year when the forum membership started picking up and people started asking questions like, as I said, how to open a trading account and buy options. Then you know, okay, this is not going in right. Till that point of time, it was happening in hundreds. And then within a week it was happening in thousands and then it just went completely overwhelming.

Basia: James also found out a really remarkable number – that speaks to this fresh influx of new trading blood… inspired by the story of the surge

James: I’ll buy some of these shares. And so, you know, one payment provider, Cardify, put out data suggesting that 60 per cent of people who bought a GameStop share in January had never bought a share of anything before in their life. So these are people who had been pulled in, not even necessarily by the forum, but by media coverage of the forum.

And I wonder whether there was almost a bit of machismo coming to play, you know, people really didn’t, you never want to be the Rube. You never want to sort of, if you’re suddenly $500, $1,000, $2,000 up, and some people are going, hey, you know, do you really know what you’re doing? Do you know the risks that you’re taking? Do you know what could happen next? And you’re winning. You want to go, yeah, of course I do. Yes, I’m sophisticated. Yes, I know all of this. And yet, obviously, as what happened with RobinHood shows, may be quite a lot of these people weren’t as sophisticated as they thought. And you have this sort of mixture of that with a quite dangerous culture in WallStreetBets, where it was seen as being a good thing to lose money, but not to cut your losses. You know, people talked about diamond hands as this thing of showing that your share price had gone way down versus when you bought it, but you hadn’t sold the stock. That is the absolute opposite of good risk management for professional traders. 

Basia: And from her scrape of the Reddit forum, my colleague Kim was able to figure out quite a bit about who these guys are by figuring out where else they post… And a common theme was memes…

Kim: So one in five had been active in the subreddit dank memes. About the same had been active in the subreddit just dedicated to memes called memes. There’s one called wholesome memes whereabouts 14 per cent had been active. 

Basia: And, perhaps unsurprisingly, they were interested in politics too.

Kim: So we found that about one in ten, has at some point commented in The Donald, which is this sort of controversial meme page in support of Donald Trump, but it was banned last year by Reddit for breaking some of the rules around hate speech.

Basia: And you could hear some of this in some of their Discord chats – a place where people can hang out and chat online. Some people referenced back to the 2008 financial crash and in that sense they were on something of crusade…

[Audio clip: Discord chat where people are talking about the 2008 financial crash]

Basia: But the question I’ve been getting at throughout this podcast – with the terminals, with trying to untangle a narrative that just… doesn’t quite fit, is were there big players making money? Was the fable in fact something of a ruse, to cover up a more… predictable story. 

We know the forum was more sophisticated than the media has reported it to be. We know that professional traders were in there too, playing along, and we know there was an influx of young people, new people, who were in many cases just carried along by the power of the story that they were suddenly a part of.

And it turns out, quite a few hedge funds were making a lot of money out of the frenzy…

James: There was a South Korean hedge fund called Must who while, you know, while Reddit peaked, sold their entire stake in GameStop, which was 5 per cent of the company. And it’s possible that they might have made up to a billion dollars doing that. There was another company, another hedge fund called Senvest, they’re not going to do diamond hands and keep hoping and you know, want to get a Reddit gold. What they did was the second that Elon Musk tweeted GameStonk, they decided that was the moment to sell. And the estimate is they made about $700 million.

But when you look at the filings, other big institutional investors seem to have sold some of their stake but not very much. And so Fidelity, which is a big US pension fund, had about nine and a half million shares in GameStop – they still have 9.3 million shares. So they’re still a huge investor, they own about an eighth of the company, but that does suggest they sold off about 200,000, probably sorting out their returns for that share for a year or two years without sort of becoming a central big player in it. And so it feels like if you sort of try and jump in this, if you try and go, well everyone else is buying it, there’s this reason to and I’ve got faith I can jump out before – you’re having to take a big bet that you can judge the mood, judge the people, judge the shares and trust your own judgement beyond everything else. And you have to risk losing a lot. Whereas the people who were just there before and have billions to invest, they can just look for the next time someone like you is trying to turn a quick buck and make a guaranteed profit. Essentially they’ve got more information than you, they’ve got more time than you, they can access all the forums and the Reddit boards that you can, they are well ahead of you. And you know when you walk into a casino the house always wins, this would be a casino ten times, a hundred times, a thousand times the size of the worlds biggest one.

Basia: When I spoke to my friend who works inside one of the big hedge funds, he told me: there was never a moment of panic. Never a moment when they thought – this could be the big reset, the moment that changes the world of finance forever. He said, they were bemused. A bit confused… they checked their positions, made sure they weren’t at risk, and waited to see if there were some ripples. No big deal. 

But on the ground? It was different – despite his cool head and measured approach, Mohammad too couldn’t help but get swept away in it all…

Basia: So if you were to put a number on your losses, what would it be?

Mohammad: Only in GameStop? 

Basia: Yes.

Mohammad: I can give you an exact figure, can I hold you for a moment?

Basia: You can, yeah.

Mohammad: I’m just getting to my account and my history of projection. There we go. So the shares that I bought were close to 3,600 in total. And I sold them off for around 1,500. So 3,600 minus 1,500.

Basia: Are you doing the maths as we speak?

Mohammad: Yeah 2,100 is what my loss is.

Basia: So a modest loss, but when we’re talking about normal amounts of money for normal people, quite a significant one.

Mohammad: It’s significant for me as well, let’s not pretend. It’s definitely significant for me.

Basia: At the end of the day, it doesn’t matter who you are. The house always wins.

We know some people made a lot of cash, quite quietly. And remember that man, Gabe Plotkin, the founder of Melvin Capital? 

Well, yes, the GameStop saga might have lost his fund billions – but he’s doing OK. Bloomberg just reported just days ago that he took home $846 million dollars in 2020 – making him one of the most successful hedge fund earners last year. Yes, he might have personally lost about half of that in January, but that still leaves him with a cool £400million of his own cash to play with, at least. 

Or take Senvest – that New-York based hedgefund James mentioned – they made nearly $700 million, one of the great fortunes of the whole GameStop mania. Or that Korean fund, Must – who might have made close to a billion. 

Or Scion Capital. If you’ve seen the film, the Big Short, you’ll remember the character, played by Christian Bale… the guy who spotted the housing market crash coming, and made around $800m by shorting it. This time, Michael Burry’s fund bought shares in Gamestop in August 2019 – and it’s partly because people noticed that he did that, that he helped lay the foundations for last month’s frenzy. In the end, Burry made around $270m in the whole saga.

Compare that to Mohammed’s £2,000 losses – which was a big loss for him. It’s hard not to see a real story here was never about David v Goliath, but really a story of many Goliaths crashing around, doing what they do, and a few David’s getting crushed in the frenzy…  

Illustration James Edwin McConnell / Look and Learn / Bridgeman Images

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