UNIDENTIFIED REPORTER, BYLINE: This is PLANET MONEY from NPR.
(SOUNDBITE OF COIN SPINNING)
JACOB GOLDSTEIN, HOST:
I mean, well, first of all, can we use your whole name, I should ask, as a reporter. It's a classic question.
IMPOSTER22: I'd appreciate it if you didn't.
GOLDSTEIN: Why is it that you prefer not to use your name?
IMPOSTER22: I work for some - a very large company, and using my full name kind of would out me.
GOLDSTEIN: So basically because sort of your - linking your online persona to your real-world self might cause trouble at work, basically.
IMPOSTER22: Yeah, it's a big no-no.
IMPOSTER22: I mean...
GOLDSTEIN: OK, that's fine.
ALEXI HOROWITZ-GHAZI, HOST:
This is imposter22. At least that's his username on what has recently become the most famous place on the Internet, the Reddit forum wallstreetbets. Just over a month ago, in December, imposter22 did the thing. He bought stock in a company called, say it with me now, GameStop...
HOROWITZ-GHAZI: ...And posted his purchase on wallstreetbets.
GOLDSTEIN: So read me the whole headline of this Reddit post, including all of the little nonverbal things that come after it.
IMPOSTER22: Doing my part. YOLO - 200K on GME stock today. Expect great things after Christmas. Rocket emoji, rocket emoji, rocket emoji, rocket emoji, rocket emoji (laughter).
GOLDSTEIN: And then...
HOROWITZ-GHAZI: And then the post showed a screenshot from his brokerage account that showed how much he paid for each share of stock and how much he invested in total.
IMPOSTER22: The average cost was $16.71 for...
GOLDSTEIN: Sixteen dollars and 71 cents.
GOLDSTEIN: OK, which amount to how much money in total?
IMPOSTER22: Two hundred thousand five hundred and fifty-eight dollars.
GOLDSTEIN: And 58 cents.
IMPOSTER22: And 58 cents.
GOLDSTEIN: So that's about a month ago. You invested almost all your money, $200,558.58, in GameStop...
IMPOSTER22: Yes, sir.
GOLDSTEIN: What happened this week?
IMPOSTER22: The stock skyrocketed an unbelievable amount.
HOROWITZ-GHAZI: Kind of an understatement.
GOLDSTEIN: Hello, and welcome to PLANET MONEY. I'm Jacob Goldstein.
HOROWITZ-GHAZI: And I'm Alexi Horowitz-Ghazi. Today on the show, an absurdist subreddit, a store that sells video games at the mall and hedge funds.
GOLDSTEIN: Also, a bunch of takes that you can project onto this story to validate almost any preexisting worldview you want.
HOROWITZ-GHAZI: It's got everything.
(SOUNDBITE OF ALESSANDRO RIZZO AND ELLIOT GREENWAY IRELAND'S "CYBERNETICAL")
HOROWITZ-GHAZI: GameStop at this point today is not just a stock anymore. It is a meme.
GOLDSTEIN: Elon is tweeting about it. The White House is monitoring the situation. Even the average house cat knows GameStop's stock symbol is GME.
HOROWITZ-GHAZI: It even has its own sea shanty.
(SOUNDBITE OF SONG, "THE TENDIEMAN")
CHRIS WILSON: (Singing) There once was a stock that put to sea. The name of the stock was GME. The price blew up, and the shorts dipped down. Hold, my bully boys, hold.
GOLDSTEIN: So when did you first find wallstreetbets?
IMPOSTER22: It was probably four or five years ago. I was, you know, just a regular nobody surfing on the Internet, playing around on Reddit.
HOROWITZ-GHAZI: And he stumbles onto this subsection of Reddit - subreddit - called wallstreetbets. Wallstreetbets is this strange combination of absurd humor and very offensive language and stock market analysis.
IMPOSTER22: So it's a lot of joking, and sometimes too much.
GOLDSTEIN: It's hard to capture what it's like when you go and read through the posts on wallstreetbets. I mean, in fact, it would be totally inappropriate for us to capture it on this podcast. You know, they call themselves 4chan meets a Bloomberg Terminal, which basically means, like, offensive Internet meets hardcore finance.
HOROWITZ-GHAZI: Yeah, yeah. Like, for example, a few podcast-friendly headlines we just saw today include - here's one - "Considering YOLOing Entire ROTH IRA Balance Into GME - I Need Confirmation Bias, Dammit."
GOLDSTEIN: Also, "If Papa Musk Is For Us Who Can Be Against Us? I'm Still Holding."
HOROWITZ-GHAZI: One more - "Babe Will You Please Sell So We're Millionaires? No. We Must Make Them Pay."
GOLDSTEIN: And, you know, besides all the memes and headlines and whatever - that last one was meme-y - there is this very particular language to wallstreetbets. Maybe the most common, sort of special word they have is, if you make a profit on a stock market bet, your winnings are tendies, which is short for chicken tenders because what else are you going to do with stock market millions but buy a bunch of chicken tenders?
HOROWITZ-GHAZI: And that sea shanty we played the beginning of a minute ago is actually called "The Tendieman," like the man who brings you your tendies.
(SOUNDBITE OF SONG, "THE TENDIEMAN")
WILSON: Soon may the Tendieman come to send our rocket into the sun. One day, when the trading is done, we'll take our gains and go.
IMPOSTER22: But there is definitely some well-written and well-educated people hidden amongst the idiots.
HOROWITZ-GHAZI: And the story of GameStop and wallstreetbets starts with some of those well-written and well-educated people writing about GameStop on the subreddit a while back, almost two years ago now.
GOLDSTEIN: GameStop is a company that has stores in malls, and the stores sell video game consoles and video games. And, you know, pretty clearly, selling video games in malls does not seem like the next big thing. Seems like - whatever - four next big things ago, maybe five. So not surprisingly, the price of GameStop stock fell from around $50 a share seven years ago to around $5 in 2019.
HOROWITZ-GHAZI: And when the stock fell that much, people on wallstreetbets started analyzing the company's books, looking at the stock price and wondering if the big financial institutions and analysts that thought the company was about to go bust had maybe missed something. People on wallstreetbets started saying, sure, this company isn't the next Netflix, but its stock should probably be trading higher than it is now.
GOLDSTEIN: We talked about this with Brandon Kochkodin, who has been covering GameStop for Bloomberg News.
BRANDON KOCHKODIN: It started with someone laying out the case that was, you know, GameStop's being treated in the market as if the company already went bankrupt. But if you look at the fundamentals, they have cash. They can pay their debt. They can service their debt. Like, this isn't a bankrupt company yet. And so there's something there still, and people are overlooking it. And so it started with that.
GOLDSTEIN: And so that is the classic way of thinking about stocks, right? Like, how much is the company actually worth, and then how much is it valued at by the stock market? And if you think it's worth more than the stock market is valuing it at now, you should buy it and hold it because eventually the stock market will adjust, and the price will go up because it's actually worth more.
KOCHKODIN: If you saw a classic value investor make the arguments that they were making for GameStop on wallstreetbets, you wouldn't flinch. You would look at it, and you'd be like, oh, good idea.
HOROWITZ-GHAZI: And, in fact, there was a classic investor who believed in this - Michael Burry, who bet against the housing bubble and was one of the main characters in the movie "The Big Short." He agreed with the people on wallstreetbets who are making this argument.
GOLDSTEIN: And then in the summer of 2020, another big investor came along. It was Ryan Cohen, the guy who had founded the online pet food site Chewy and then gone on to sell it for billions of dollars. Last summer, he said he had invested millions of dollars in GameStop, and he envisioned this whole online future for the company - you know, Chewy but for video games. And still, for all that and those big-name investors and wallstreetbets, the stock price was still around $5 a share - cheap.
HOROWITZ-GHAZI: And then last fall, there is this moment that I think is kind of the key pivot in this story. Someone from wallstreetbets named Player896 published a post with a different argument about GameStop.
KOCHKODIN: So the post is "Bankrupting Institutional Investors For Dummies, Ft GameStop."
GOLDSTEIN: And this post - it does two different things. For one, it lays out that fundamental value story that people have been talking about for a while. There are new video game consoles coming out, and people still do go to GameStop to buy consoles, et cetera, et cetera. But maybe more importantly, Player896 also makes this other argument about GameStop. And this other argument is the one that's going to become really important when everything with the stock starts to go bananas.
HOROWITZ-GHAZI: Player896 points out that lots of hedge funds - those are the institutional investors in the headline - are betting on the price of GameStop shares to fall. In the jargon, the hedge funds are shorting GameStop stock.
GOLDSTEIN: At this moment, in fact, GameStop is one of the most shorted stocks in America. Basically, something like all of the shares that are available to trade have been borrowed and sold short.
HOROWITZ-GHAZI: In the jargon, the hedge funds are shorting GameStop stock, and shorting a stock is basically the opposite of buying a stock.
GOLDSTEIN: So, OK, here is, like, the very simple version of what shorting a stock means. So, OK, normally in the market, you buy a stock, you hope that it goes up, and then you sell it. Shorting is the opposite. First, you sell the stock, and then you hope that it goes down, and then you buy it.
HOROWITZ-GHAZI: How is it possible to sell a stock first? To explain, let's just pause here and do a little classic PLANET MONEY theater.
GOLDSTEIN: So, OK, Alexi, let's say you own - whatever - one share of GameStop stock. I want to short that stock. So I come up to you, and I say, how about you lend me that share of stock?
HOROWITZ-GHAZI: OK, Jacob, I'll lend it to you, but it's a loan, so I'm going to charge you interest 'cause it's a loan. And also, I don't entirely trust that you'll give me my share back in the future, so I'm going to make you put a few bucks in this special bank account over here - money I can take if you don't pay me back.
GOLDSTEIN: OK, I will take that deal. So you're going to lend me the stock, and then I'm going to go and sell it out on the market, and then I'm going to put some money in that special bank account you have, and we're done.
HOROWITZ-GHAZI: So now it's a week later. The price of the stock has gone up. You, Jacob, are now losing money on your bet. I'm going to say to you, you either have to go out into the market and buy that stock back so you can give it back to me now or pay me even more interest and even more money in that special bank account as kind of insurance.
GOLDSTEIN: And so what this means for me shorting the stock is it is getting more and more expensive just to hang on, just to keep this bet going as the price goes up - right? - because I have to keep paying you more and more in interest and putting more and more money into that special bank account just to stay in the bet, just to keep it going.
HOROWITZ-GHAZI: Now, take all of that and think about what it means in the case of GameStop, this company that basically everybody is shorting. If the price of the stock starts to go up, it's going to get more and more and more expensive for those hedge funds to hold onto their short bets. Remember; they have to keep paying in. At some point, it'll just be too expensive, and they'll have to start closing out their bets. They'll have to buy back the stock that they sold short.
GOLDSTEIN: And then - this is the big moment - that very buying that they're doing - that will cause the price of the stock to go up even more because, you know, that's what happens. When people buy stock, the price of the stock goes up, right? So now the stock is going up even more, so it's even more expensive for the remaining people with short bets to hang in there, right? So they're going to have to close out of their bets and buy the stock, which will cause the price to go up even more, right? So this is just a cycle - shorts closing out their bets, driving up the price, causing more shorts to close out their bets, driving up the price even more. This cycle has its own name. It's called a short squeeze.
HOROWITZ-GHAZI: Player896 understood all of this and wrote in that post, if GameStop stock got up to around $15 a share, there would be, quote, "a massive short squeeze." It was like a little snowball up at the top of a mountain that could turn into an avalanche if it just got a little bit of a push.
GOLDSTEIN: And the stock did start going up after that. It went from below $10 a share in September to over $15 in mid-December. That is a 50% gain. And this is when our man, Imposter22 of wallstreetbets, got interested.
HOROWITZ-GHAZI: That is after the break.
GOLDSTEIN: Imposter22 was interested in GameStop for a few reasons. He liked both that old fundamental value story - you know, this company is actually worth more than its share price.
IMPOSTER22: They had a huge deal with Microsoft, which I think a lot of people overlooked.
HOROWITZ-GHAZI: Also the possibility of a massive short squeeze.
IMPOSTER22: So what I found compelling was the heavy short interest.
GOLDSTEIN: And so...
IMPOSTER22: I decided to go all-in. I threw all of my money at it.
GOLDSTEIN: How much money?
IMPOSTER22: In total, at first, around 200,000.
GOLDSTEIN: A lot.
IMPOSTER22: A lot, yes. It was my house down payment money that I was saving.
HOROWITZ-GHAZI: Over the next few weeks, the stock goes up some, then back down, and Imposter22 is trading in and out. And at some point, he decides to go more than all-in.
IMPOSTER22: So I cashed out my 401k for an extra hundred grand to put in.
GOLDSTEIN: Oh, my God. You shouldn't have done that. I'm sorry (laughter).
HOROWITZ-GHAZI: He sells some of his stake, takes out about 40,000 when the stock goes up. But he still got most of his money in there. And then the stock goes back down even more. He's losing money on the investment at this point. And in early January, he decides to put that 40,000 in profit back into more GameStop stock. And, of course, he posts about it on wallstreetbets under the headline...
IMPOSTER22: "How I Feel Dumping 40 More K Into GME Shares This Morning."
GOLDSTEIN: And then after the headline, there's a diamond emoji and a hand emoji because diamond hands are another wallstreetbet, like, inside language joke.
IMPOSTER22: Diamond hands are people who buy stocks and hold on to them, and they don't let go, no matter the fluctuation in the market value. Like, if it drops 20%, they're diamond hands, they're still holding because they understand that the value will go up in the future.
HOROWITZ-GHAZI: And then, by the way, there's the opposite of diamond hands for if you get scared and sell too soon.
IMPOSTER22: Poop emoji hands.
GOLDSTEIN: But in this post from January 5, Imposter22 is all diamond hands, rocket ship emoji, rocket ship emoji. Then there's a screenshot showing the purchase from his brokerage account. And then there's a "South Park" meme showing a guy who just got beat up.
HOROWITZ-GHAZI: And then, a week later, the big moment arrives for Imposter22 and really all of wallstreetbets. Ryan Cohen, the Chewy founder who had bought all those shares in GameStop last summer, he gets named to the GameStop board, along with two of the people he ran Chewy with. And it seemed like the Chewy-but-for-video-games story might actually come true.
GOLDSTEIN: Within 10 days, the price of the stock had more than doubled. Now it was over $40 a share. And this was when a kind of semi-well-known Wall Street guy with a short against GameStop posted a YouTube video arguing his case for why GameStop stock was overvalued.
(SOUNDBITE OF ARCHIVED RECORDING)
ANDREW LEFT: Hey. This is Andrew Left of Citron Research giving you five reasons why GameStop is going to $20.
HOROWITZ-GHAZI: He argues both against the short squeeze case and the fundamental value case for the company. He says the shorts aren't going to be forced to sell. They have enough money to stay in the trade, and there won't be a squeeze. And he says the company's sales have been even worse than expected.
(SOUNDBITE OF ARCHIVED RECORDING)
LEFT: The physical locations were actually down during the past month. They were losing to Amazon, Best Buy, Target and Walmart.
GOLDSTEIN: One other thing he mentions - he's been getting harassed because of his GameStop short.
(SOUNDBITE OF ARCHIVED RECORDING)
LEFT: People who are ordering pizzas to my house or signing me up for Tinder or doing all those cute things, trying to hack my Twitter account.
GOLDSTEIN: And then, in closing, he says again, look; this stock is going to go down to $20 a share. And then he posts the video.
HOROWITZ-GHAZI: After he posts the video, this wallstreetbets narrative that's been going on for a while gets even stronger. GameStop isn't just an investment. It's a battle between Wall Street people like Andrew Left and the self-loathing, chicken tendie-loving everymen of wallstreetbets.
GOLDSTEIN: The day after Left posted that video, GameStop went from $43 to $65 a share. That was last Friday. And now, no matter what Left had just said, it looked like the short squeeze really was on. On Monday, the stock went to 76, Tuesday to 148. And on Wednesday, it went to over $300 a share. President Biden's press secretary that day talked about it, said Janet Yellen and the White House were monitoring the situation. It's Janet Yellen in the White House, ladies and gentlemen.
HOROWITZ-GHAZI: On wallstreetbets, a guy who had been posting about his investments in GameStop since 2019 posted a screenshot that seemed to show he had turned $50,000 into $48 million. He still hasn't sold as of this recording - diamond hands.
GOLDSTEIN: By the way, this person, like a lot of people on wallstreetbets, invested not by buying stock, but by buying call options. And it's a long story. But basically, one thing about call options is it forces other people to buy, still, more stock. So all these call options, they were also helping to drive up the price of the stock even more.
HOROWITZ-GHAZI: And on Wednesday, Andrew Left, the short seller tendie men love to hate, posted another video.
GOLDSTEIN: The Tendie Men opened for Janet Yellen at the White House, but they got booed offstage.
(SOUNDBITE OF ARCHIVED RECORDING)
LEFT: So the reason I'm doing this video is because I cannot answer one more phone call - how are you? Are you OK? Are you in business? What about GameStop? Should I short it here? - people I have not spoken to in 20, 30 years. This has captured the attention of the America and every trader and nontrader alike.
HOROWITZ-GHAZI: Then Andrew Left gets to the business part.
(SOUNDBITE OF ARCHIVED RECORDING)
LEFT: I'm just fine. Citron Capital is just fine. Cover the majority of the short in the 90s at a loss 100%, have a small imaginable position, and I'll let it go (ph).
GOLDSTEIN: He's kind of swallowing some of it there. But what he's saying is, one, I'm just fine. Citron Capital is just fine. Means he's not, like, about to go bankrupt. And then, two, he's saying he got out of his short bets. He got out at $90 a share. He lost all his money on the bet, and he's basically done.
HOROWITZ-GHAZI: Andrew Left and the short sellers lost. Wallstreetbets won. That is, at least, the story so far.
GOLDSTEIN: And this is the moment in the show where we step back and say what it all means, you know? But I feel like in this instance, just this week, just in the last few days, there have been so many GameStop takes that we should just do, like, a take lightning round of all the takes that have been out there. Go.
HOROWITZ-GHAZI: Take No. 1 - revenge of the common man. In this story, hedge funds live in this rigged system. And finally now, wallstreetbets is riding in to stick it to them using Wall Street's own tools.
GOLDSTEIN: OK, OK, a few caveats on that take - one, at least, you know, some of the people on wallstreetbets - they clearly have a fair bit of money to invest in the first place. They're not Wall Street rich, but they're also not poor. Another thing - it's possible that some hedge funds jumped in alongside wallstreetbets a while ago on the GameStop trade. So they got rich, too. They made money, too, off of this. And then finally, clearly, we know, you know, some of the people who made the most money on GameStop were people like Ryan Cohen, the Chewy billionaire, not the common man.
HOROWITZ-GHAZI: OK, here's another take - take two, if you will. This crazy thing happened. Basically, the stock market broke for this stock because of people making short bets. So shorts are bad.
GOLDSTEIN: This is kind of a classic, right? When weird things happen in the stock market, people very often say shorts are bad. And I think this is largely because people - by and large, people who are involved in the stock market want the stock market to go up, right? And so they get angry at the people who want the stock market to go down. But I don't really buy this one because, you know, short selling gives people a financial incentive to look into companies, to investigate them, to figure out which companies are spinning the truth or even outright lying, right? And this is useful. You don't want everyone to just want stock prices to go higher. Sometimes prices should go down, and short sellers can help that happen.
HOROWITZ-GHAZI: And then there's the classic, this is bad because people are going to lose a lot of money, or this is bad because it's just gambling. It's not investing.
GOLDSTEIN: Definitely, it's just gambling, right? I mean, the site is called wallstreetbets. Like, they're owning up to that, you know, and so we all know they're gambling. Fine, it's gambling. Also, some people, yes, are going to lose a lot of money. I mean, somebody apparently bought at least one share at $468 for one share. And, you know, clearly, when everything settles down, I think it's fair to say the price is going to be way lower than that. So, yes, people are going to lose money. Is it bad? I don't know. I mean, plainly, people know this is like a mania, right? They're betting based on rocket ship emojis. People aren't being, like, duped into thinking this is a super-safe investment. It's clear that you might lose money. And as a general matter, we do let consenting adults make bets where they know they might lose money.
HOROWITZ-GHAZI: OK, last take - it does feel like something kind of fundamental may have just shifted in the balance of power on Wall Street. For decades, day traders have chased money around in the shadow of the big fish, the hedge funds and investment banks. But this thing we all just witnessed was, if anything, a kind of light switch moment, where all of a sudden, wallstreetbets bros, along with the rest of us, have realized that they have this powerful tool, that by swarming together, individual investors have the power to move the market and force the hand of major financial institutions.
GOLDSTEIN: At least, they do seem to have the power to move the stock price of a company that is relatively small and has a ton of short bets against it. And it's clear that that fact is already changing the way that Wall Street people like Andrew Left will think about the way they invest. He said so in that video.
(SOUNDBITE OF ARCHIVED RECORDING)
LEFT: Even though we're - have been called boomers many times over the past week, we understand the changing dynamics in the market. So with that, we'll become more judicious when it comes to shorting stocks.
HOROWITZ-GHAZI: Wednesday, the day Andrew Left put out that video, the day GameStop went to the moon was also the day we talked to Imposter22...
GOLDSTEIN: (Whispering) Diamond hands.
HOROWITZ-GHAZI: ...The guy who had invested $300,000 in GameStop.
GOLDSTEIN: Have you sold yet?
IMPOSTER22: I sold this morning around 10 a.m.
GOLDSTEIN: Just today you sold?
IMPOSTER22: I did.
GOLDSTEIN: How much money did you get when you sold today?
IMPOSTER22: Just under 4 million.
GOLDSTEIN: I want to know the exact number.
IMPOSTER22: Let's see - $3,919,506.86.
GOLDSTEIN: Today you sold for that much money?
IMPOSTER22: Yes, sir.
HOROWITZ-GHAZI: We should say we weren't able to independently verify this, but Imposter22 sent us what he said was a screenshot of his brokerage account. He says he's going to pay about $2 million of his profits to the government in taxes, set aside a few hundred thousand dollars to invest again and use the rest to finally buy that house.
GOLDSTEIN: Are you going to order in some nice dinner? Are you going to do any little thing before you buy a house? You just made millions of dollars today.
IMPOSTER22: Yeah. I mean, me and my wife will probably celebrate, have a nice steak dinner that we'll cook. We like cooking at home.
HOROWITZ-GHAZI: Also, he says they'll probably buy a new car for his wife.
IMPOSTER22: I'm sure she'll want to get a new car. She currently has a pretty - a 2005 Toyota. But she likes her car, but, I mean, I think it's time she get something a little newer, maybe something electric.
HOROWITZ-GHAZI: He says he's considered getting a Tesla, but he's not sure. A few years back, he lost $60,000 on Tesla options and hasn't quite gotten over that yet.
(SOUNDBITE OF ALESSANDRO RIZZO AND ELLIOT GREENWAY IRELAND'S "C310037")
GOLDSTEIN: If you teach economics or know somebody who teaches economics or are interested in teaching economics, I've got good news for you. There is a new website, npr.org/teachplanetmoney. The website is set up to help people teach high school and college students using episodes of PLANET MONEY. Check it out. It's great - npr.org/teachplanetmoney.
HOROWITZ-GHAZI: Today's show was produced by James Sneed, with help from Gilly Moon. Our supervising producer is Alex Goldmark, and Bryant Urstadt edits the show. Special thanks to our intern, Dan Girma. I'm Alexi Horowitz-Ghazi.
GOLDSTEIN: I'm Jacob Goldstein. This is NPR, rocket ship emoji. That's not going to work. This is NPR. Thanks for listening.
(SOUNDBITE OF SONG, "THE TENDIEMAN")
WILSON: (Singing) Before the news had hit the market, wallstreetbets came up and bought it. With diamond hands, they knew they'd profit if they could only hold. Soon may the tendieman come to send a rocket into the sun. One day, when the trading is done, we'll take our gains and go.
NPR transcripts are created on a rush deadline by Verb8tm, Inc., an NPR contractor, and produced using a proprietary transcription process developed with NPR. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.