The insane rise of GameStop last year might only be the beginning.
“[On Reddit, we’ve] never stopped talking about GameStop … I want to see the price keep going up,” Joe Fonicello, an early investor and college student, says in the new documentary, “GameStop: Rise of the Players,” in theaters Friday.
The film, which debuts exactly a year from the phenomena, explores how a bunch of meme makers and gamers turned the seemingly struggling chain’s stock into a bullish investment that reached a high of nearly $500 per share in early 2021, up from a low of roughly $3 in 2019. In the process, they netted financial novices $70 million, while costing hedge funders $13 billion and counting.
Although the wild ride gave GameStop “sex appeal,” as Fonicello puts it, there was a time when the Redditors who saved the stock, which trades under the symbol GME, laughed at its expense.
Wall Street Bets, the Reddit hub of memes and financial advice responsible for fueling the GME surge was so initially anti-GameStop that early investors like Farris Husseini — an Alabama data visualizer — were banned from posting about the company because it annoyed so many users.
“GameStop was hated among gamers, like hated,” Jeff Tarzia, a former video game tester and one of the stock’s few early supporters, says in the documentary. He admits that the bias was understandable. Notorious for awful customer service and pathetically weak game trade-in values, GameStop was predicted to be the next Blockbuster as the video game industry had been rapidly shifting to online retail before COVID hit.
Despite all this, early in the pandemic, a few GameStop true believers scattered across the US managed to find community through nightly livestreams by galvanizing YouTuber and GME investor Keith Gill. Better known as “Roaring Kitty,” Gill is now widely regarded as the prophet of GameStop’s success.
Gill and his followers would hyper-analyze the numbers a few nights a week, but the big level-up came when Ryan Cohen, co-founder of the pet food e-commerce business Chewy, bought big into GME. He joined the board of directors in the fall of 2020, later becoming chairman.
Cohen — who was confident that his old startup Chewy would have succeeded selling any product — was quick to jump on the front line of GME by holding one-on-one Zoom calls with investors.
“He literally just peppered me with questions, ‘What do you see in GameStop?’” said investor Justin Dopierala, founder of Wisconsin based DOMO Capital, a firm that manages mostly blue-collar clients.
The new head honcho very quickly righted the ship for GameStop. In a move that impressed CNBC’s Jim Cramer, he shook up the executive board by bringing in Amazon bigwigs in 2020, while also deeply connecting to the everyday people who put their money into the once failing company.
By late August 2020, the stock — which had bottomed at below $5 in April — was around $10 and climbing. The GME faithful were rewarded with a few glowing signs that things were heating up. GameStop signed a multiyear strategic partnership with Microsoft, and consoles like the PlayStation 5 announced they would still have disk drives rather than being download only, keeping the lifeblood of GameStop’s products on shelves.
“It tells me the brand’s not dead, it tells me there’s still a rabid consumer base that wants their products,” early investor turned financial TV regular Ron Alzmann says in the documentary.
Reddit’s Wall Street Bets crew took notice and started taking GameStop seriously.
Around the same time, users became increasingly aware of a later publicly admitted plan by hedge fund Melvin Capital to run GameStop out of business by short selling its stock. That’s when the the players united to take on the big boss — Wall Street itself.
“Reddit saw that happening and said, ‘Woah, woah, woah, we can stop this,’ … It was the perfect storm to destroy a hedge fund,” Tarzia says.
In January 2021, Redditors across the nation banded together and historically bought into GameStop, causing Melvin’s fund to plummet 30 percent — and requiring that Mets owner Steve Cohen and Ken Griffin’s major firm Citadel step in with a $2.75 billion bailout.
Soon after, the gamers declared victory as Melvin completely bowed out of GameStop around the same time its stock hit that peak of $483 a share. The success inspired Redditors to take similar actions with companies such as AMC and Blackberry.
Revenge against Redditors
But Wall Street bigwigs weren’t about to just roll over.
In late January 2021, major firms halted GME trading while trading apps such as Robinhood and TD Ameritrade also restricted actions, causing GameStop’s stock to drop to around $90. (On Thursday, a federal court dismissed charges against Robinhood.)
The move — which had stocks hitting $40 the next month — was so controversial that several class action lawsuits were launched against Robinhood and congressional hearings were hosted after the everyday investors had their portfolios demolished.
“It’s just a little bit too convenient that you’ve got Melvin Capital losing billions of dollars, Citadel backing them and then two days later Robinhood is stopping people from buying it. If that’s what’s happening, they all are in bed with each other, which is scary,” Tarzia alleged.
Though, others like Alzmann say the trading platforms were just stretched too thin and faced liquidity issues.
Even after the bubble popped and it seemed like the GME craze was done and over, investors like Gill stuck with GME and reenergized the movement online last winter, bolstering public belief that GameStop would rise again.
Now, the ongoing question of “is the squeeze sqouze?” is being argued on Reddit by the new legions of GME converts, many of whom say Cohen will bring even bigger returns to the hallowed stock.
But whether or not GameStock, currently valued around $93 a share, will yield continued returns, it’s undeniable trading has been forever changed.
“You don’t have to be a financial expert to be a good investor, to be a good trader. Anybody can analyze a company nowadays, you can go onto the internet and start reading,” Husseini said.