The Apes are Getting Free Popcorn

An update on the retail investor movement sending meme stock valuations through the roof

I’m writing about Gamestop and AMC again. The last time I wrote about Gamestop and AMC was on May 3rd. Gamestop (“GME”) was valued at $162.20 and AMC was at $9.71. As of today’s open, a share of GME is valued at ~$282.50 and AMC is at ~$68.00 - a ~74.17% and ~600.31% gain respectively. I’m not going to say I told you so, but I told you so. And I believe this story is still just getting started. So, what’s going on? Well, in my last piece I went into detail *admittingly too much detail* about how things have come together so I won’t bore you with any background. But here’s the quick rundown: Retail investors believe hedge funds are shorting AMC and GME and using deceptive techniques (naked shorts etc.) to bankrupt them so they make a bunch of money and don’t have to cover their shorts - see Toys R’ Us.

Retail investors, known as apes, poured in and snapped up shares of GME and AMC to counter the hedge fund’s strategy. Apes are vowing to hold and not sell (“HODL”) any of their shares until each share is valued in the tens of thousands to millions of dollars. You read that correctly. The sentiment on Reddit forums (r/amcstock & r/superstonk) and ape Twitter is that if retail investors HODL, hedge funds will be forced to pay whatever price the market will bear to cover each of their short positions. Retail investor’s logic is that if they own the float (the regular shares a company has issued to the public that are available for investors to trade) they can control the price hedge funds will be forced to pay to cover their short positions. Mainstream media continues to miss this aspect of the story for some reason. Retail investors aren’t investing in GME and AME because of business fundamentals or because it’s a funny meme, they’re investing to both force and profit off of what they believe will be the largest short squeeze in human history - the Mother of All Short Squeezes or “MOASS” for short.

Yes, this gorilla is using a banana computer.

Without diving into the merits of the due diligence being shared on the subreddits and Twitter feeds of retail investors, I think we are witnessing something historic. Now, when I say historic it doesn’t mean positive necessarily, it just means something we haven’t seen before that will likely have an ongoing effect for decades to come. To me, the GME and AMC retail investor movements are utterly fascinating from an anthropological perspective; retail investors, of different generations, socio-economic classes, religions, political loyalties, and geographical regions, have joined forces to form a distributed hedge fund, swapping diligence online in an attempt to beat traditional hedge funds, save select businesses, and make a bunch of money…what?!

I saw this tweet yesterday from Andrew Ross Sorkin…

Andrew Ross Sorkin @andrewrsorkin

The long term impact of $AMC + $GME isn't about what happens to these companies or their stocks. It is about the public, which views the stock market (and economy) as something that is manipulated and not trusted.

I definitely agree. But maybe not for the reason Andrew Ross Sorkin may have intended. Despite the pandemic, the stock market had a banner year. Wall Street and the rich profited while Main Street suffered. After reading retail investor posts, it seems to me that owning GME and AMC stock has become a symbol of defiance against a system that retail investors do not believe works in their interest. Someone should tell Andrew Ross Sorkin that retail investors are dumping their money into GME and AMC precisely because they believe the stock market is *already* manipulated and not to be trusted.

Mainstream media continues to call GME and AMC “meme stocks” but didn’t we just have a meme President? Calling something a meme does not resolve the cultural zeitgeist leading to its creation. Calling something a meme downplays the implications and importance of understanding what’s happening now and what may be around the bend. So-called meme stocks don’t appear to be a fad, in fact, I think this movement may just be getting started.

So what happens if GME and AMC shares don’t soar to the record highs expected by the retail investors? What happens if they do? I don’t have answers, but I think we need to start thinking about a plan for what happens next. These fervent communities, or “stock-ticker cults” as I called them in my last piece, are not going anywhere. What have retail investors set their sights on next? Blackberry. Bed Bath & Beyond. The list goes on. How and when will this end? I don’t know and it may not be pretty. But at least I’ll have free popcorn. 🍿