What AOC and Margot Robbie Have to Do with GameStop
Before Monday, I cared as much about the stock market as I care about the parts of the Super Bowl that happen before and after the Halftime Show — that's to say, not a lot. But today, I find myself watching GameStop stock rise with the feverish intensity I usually reserve for a new episode of Bridgerton.
If you've been following along via the occasional headline, you probably recognize that the situation is complicated, loaded with terms that make my eyes gloss over, if not water. For those of us who wouldn't know Jim Cramer from Jimmy Carter, however, the celebrities are here to help.
First up: Margot Robbie.
The star is trending because of her cameo in the 2015 film The Big Short, in which she — as herself, the actress Margot Robbie — explains what it means to "short" a stock. Toward the end of her bathtub monologue about sub-prime mortgages, she helpfully explains in her Aussie lilt that shorting stocks means to "bet against them."
What does this look like in practice?
When you short a stock, you borrow shares from a broker, who is lending you those shares from another of their clients. Keep in mind that that client will eventually want their shares back. If you borrow two shares and sell them for $5 each, for example, you end up with $10. If the stock price goes down, as it was predicted to in GameStop's case, you'll pay the lower price to buy them back, and pocket the difference. So, if the share price goes down from $5 to $2, then, you'll only pay $4 in total to buy the shares back (which you owe to your broker), thus making a $6 profit. (See also: This helpful breakdown involving apes, snakes, and bananas.)
What the hell does this have to do with the video game chain store that my high school crush used to loiter in front of after school?
As this red-headed Canadian man on YouTube helpfully explained, hedge funds were "heavily shorting" GameStop ($GME), believing that, like Blockbuster, it would become obsolete, and the price of its shares would fall. So they bet against it.
What you'll want to remember is that regular folk who are not hedge fund bros — aka "retail investors" — greatly dislike Wall Street because of their tendency to make poor decisions, and then require taxpayer money for massive bailouts. (This among other reasons, including but not limited to the lack of regulation and the pervasiveness of blue gingham shirts under Patagonia vests.) How do you take down the big guys? You coordinate a massive buy-in on a subreddit called WallStreetBets, with the goal of shooting the $GME stock price "to the moon."
Thousands of retail investors began buying $GME shares not because they think that GameStop is making excellent business decisions, but because if the price of the shares rises (a consequence of having more buyers), hedge fund investors will be forced to buy back the shares they borrowed at a higher price, essentially losing money. Hemorrhaging it, even.
This brand-new phenomenon of buying into a stock for the sole purpose of bleeding out the big guys has been referred to as "flash mob trading." Some have even coined GameStop stock, and other similarly declining brands like AMC Theaters ($AMC) and Nokia ($NOK) that retail investors are buying, as "meme stocks."
And here's where Alexandria Ocasio-Cortez comes in. Last night, she cheered on the little guys for beating Wall Street cronies at their own game.
So, we're good right? The little guys are profiting off hedge funds, bragging on Twitter and TikTok about how the value of their portfolios had increased enough to pay off student loans, or cover their overdue rent. If they listen to Ja Rule and hold their stocks, refusing to cash out in an effort to get the price to rise even higher, they could potentially earn more money for all the little guys. A win!
But here's where things get even more complicated. Robinhood, a trading platform popular among "newbie retail investors" (according to the kind men on the Wall Street Bets Discord server I spoke to last night), stopped letting people buy GameStop stock, citing market volatility. As of press time, it is only allowing buyers to close out their positions (selling the stock). The more people that sell and the fewer people that buy, the better for the Wall Street bros.
This set off a whole new "once in a lifetime" scenario: AOC and Ted Cruz agreeing with each other on Twitter.
Alas, hell hasn't completely frozen over. AOC replied to Cruz's tweet asking him to resign. See? A little normalcy, as a treat.
You may be wondering, are Robinhood's actions legal? Are we going to be OK? How can they get away with this? The thing is, no one knows!!
To quote my favorite game show host Drew Carey (who, for the record, has yet weigh in on the stock market), "everything's made up and the points don't matter."