An inside look at the weekend the GameStop frenzy began on WallStreetBets

An accomplice of the cameraman, a young blond man in sweatpants and a red headband, swooped in from behind and, laughing, snatched up the PlayStation box and ran away at full speed, repeatedly spitting out the word PlayStation with deranged joy as he raced off.

The cackling of the thief made it a particularly sordid scene to watch. But in the inimitable style of WallStreetBets, the video, which had first appeared on Twitter, was pulled into a post and described amorally as a trading signal, and a very bullish one, for the store that sold the PlayStation 5—GameStop, or GME, as the company was known in the stock market.

The title and only words in the Reddit post put the thesis simply: “PS5 robbery outside of Gamestop, BULLISH long GME.”

‘Get in asap, we’re going to Pluto’

GameStop was in some ways an odd stock for the subreddit, which had tended to go for futuristic technology companies like Tesla and Virgin Galactic. GameStop was more like a remnant of the past, and it was getting eaten alive by tech companies such as Amazon.

Since the era of the original Nintendos and Segas, GameStop had fallen on hard times. The video-game industry was booming, but much of the growth was coming from digital downloads and iPhone games, which didn’t require going to a store.

The surviving GameStops were somewhat notorious for their stained carpets and musty smell. The video of the robbery captured the seedy feel of the outlets, which were often a few doors down from liquor stores and check-cashing depots.

As digital game downloads became more popular, many people assumed GameStop would go the way of Blockbuster, which had filed for bankruptcy after its physical videotapes lost out to the digital offerings on Netflix.

But on Black Friday, GameStop seemed to be getting an unlikely bump due to those new video-game consoles from Sony that had just been released and that were selling like hotcakes.

Sony had decided to include a slot for a game disk in the new PlayStations, which suggested that GameStop’s physical stores might not be dead yet.

Everyone on WallStreetBets seemed to be aware of all these dynamics, thanks to the video-game-loving tendencies of the guys who hung out on the subreddit. Now they aimed their memes and their Robinhood accounts squarely at GameStop.

“Get in asap, we’re going to Pluto,” one longtime member wrote under the title “GME Gang Gang Gang Gang.” The post showed a picture of a portfolio with $225,000 of call options on GameStop.

Part of the reason that GameStop had not broken out on WallStreetBets before this weekend was the rule Jaime Rogozinski, the founder of the subreddit, had put in place the previous spring banning posts about penny stocks and companies worth less than a billion dollars. GameStop had thousands of stores, but it was struggling so much that the whole company had essentially been valued as a penny stock.

On Black Friday, though, the company had broken through the one-billion- dollar threshold, and when the ban was removed, it was like a dam had broken.

The company surged past Tesla that day to become the most talked about stock on the subreddit. As the stock went up, Jordan Zazzara, the most active moderator on the subreddit, stayed glued to his desk, trying to contain the flood of posts about the latest meme stock.

“I’ve been literally staring at the sub and spamming things since market opened,” Zazzara wrote a few hours into the day. “We’re sending a message with dozens if not hundreds of temporary bans for low quality submissions. I’ve been banning since 9 a.m.,” he added.

The posts coming in about GameStop reflected a remarkable degree of research and knowledge about the company. There were lengthy write-ups about the company’s recent history, especially the news that a young billionaire named Ryan Cohen had bought a significant chunk of GameStop shares with an apparent interest in taking control of the company.

But there was also a lot of talk about how GameStop looked like many of the other big names that had broken out on WallStreetBets, given its unpopularity among hedge funds. Like Tesla and Palantir, GameStop was a popular stock to short among hedge funds, though GameStop took it to a whole new level.

Back in February, when Tesla had been one of the most heavily shorted stocks on Wall Street, hedge funds had borrowed around 20 percent of the company’s shares to short them, a common way of measuring the degree of short interest or pessimism toward a company.

With GameStop, the short interest was five times as high, around 100 percent, which meant that hedge funds had borrowed essentially every single share of the company to short it. The early posts about these figures suggested that there was something offensive about the way Wall Street could borrow every single share a company had issued in order to bet on its demise.

The anger that began to pick up played right into the fury toward hedge funds that had emerged the previous month after Andrew Left of Citron Research had criticized and bet against the most popular stocks among retail investors.

GameStop seemed to offer a perfect opportunity to get some revenge.

If the crowd could push GameStop’s stock up, they could make the hedge funds lose money on the big bets they had placed against GameStop. One popular post recalled the recent fight with Left and Citron Research to get the crowds riled up.

“How many times has a short screwed over your calls or positions because of a single Tweet ahem Citron/PLTR ahem or manipulated your stock to the point where you bought high and sold low?” one post asked.

“Well, here’s a chance to redeem yourself.”

‘We’re just trying to be careful’

Zazzara did not like the direction this was going. He had just cracked down on the efforts to take down Citron Research for fear that they would give Reddit an excuse to kill the subreddit. Now Zazzara went into action again, deleting posts that talked about pumping or squeezing GameStop.

“You know when you love your cat but it won’t stop going on the fucking table and that’s literally the one place you don’t like it to be?” Zazzara asked. “That’s how I feel about these GME posts that are using the ‘P’ and get in so we can cause an ‘S’ words that are no-nos.”

He once again tried to convey that this was not about censorship: “We’re not removing them because we want to impinge on your freedoms. We’re just trying to be careful.”

But in the days that followed, the stream of material about GameStop kept coming, and as Zazzara watched it all pour in, he could see that this was not just some pump-and-dump scheme orchestrated by a handful of people. There was a lot of very smart and detailed due diligence on GameStop, arising out of what looked to be a new kind of crowdsourced research effort unlike anything WallStreetBets had seen before.

The most visible new character on the subreddit was a guy who went by the username Uberkikz11. He wrote detailed posts arguing that GameStop had a much more promising outlook than the views coming out of Wall Street would suggest. To support his argument, Uberkikz11 relied on information he pulled from GameStop’s financial filings and other data sources. Uberkikz11 had put what he said was a “majority of his net worth in GME” and he was eager to use social media to get the word out about the company’s potential.

“I’m here to provide as much boots on the ground $GME intelligence as one man can deliver. Clearly I’m not doing all this financial modeling and scraping for nothing. I enjoy helping others here.”

In real life, Uberkikz11 was a 31-year-old who lived in Tampa, Florida, and worked in middle management at the truck rental company Ryder. He said his odd username was from when he had been a tween soccer freak with the number 11 on his jersey.

Unlike most people on Reddit, who embraced the anonymity of social media, Uberkikz11 often mentioned his real name, Rod Alzmann, and his rather fuddy-duddy tastes, like the 2014 Chevy Bolt he drove and the Vanguard retirement account where he kept his GameStop options.

“I’m an 81-year-old man in a 31-year-old body,” Alzmann joked.

But Alzmann emphasized that he was trying to do something very modern with his GameStop investment by harnessing the crowds on social media to pool their knowledge and resources so that they could compete against the hedge funds that always seemed to have such an edge over ordinary people.

Alzmann’s most impressive project was an effort to estimate GameStop online revenues by collecting receipts from all the GameStop customers he met online. Alzmann had noticed that GameStop, unlike most stores, numbered its receipts sequentially. This meant that if he had receipts from the beginning of the day and others from the end of the day, he could estimate how many transactions the company had done.

During the Black Friday weekend, he had gone around asking everyone to send in their receipts as they bought their new PlayStations and Xboxes from GameStop.

“GME ORDER NUMBERS! SHARE YOUR ORDER NUMBERS HERE!” he had bayed on social media like some carnival hawker.

Alzmann used the data he gleaned to put together estimates on the company’s quarterly revenues, which he frequently updated and promptly shared with his online followers.

The other person who came up in all the online conversations about GameStop was a character who went by the name Roaring Kitty. He appeared to do most of his work on YouTube, where he ran a regular livestream show that brought people together to talk about the latest news and data on GameStop. He had been ramping up the YouTube channel over the fall and by December he was holding court a few nights a week for several hours each time.

Roaring Kitty pulled up charts and documents as he spoke, but he also interacted frequently with the people who gathered in the live chat that ran alongside his video stream. Alzmann joined in the live chat and talked with Roaring Kitty and the others in attendance about their latest findings, constantly challenging them to find any detail that might make them reconsider their investment. They did not want to be bullish if being bullish was not supported by the evidence.

As they did this work, Roaring Kitty constantly made fun of himself and the others for their obsessive interest in this offbeat company.

“Who the HELL can talk about a single stock for 5 hours straight?!” he asked.

“I’ll tell ya who . . . the Roaring Kitty crew.”

Before December, because of the ban on posts about companies worth less than a billion dollars, most of the conversation about GameStop had been happening on other social media networks.

Roaring Kitty was one of the many online personalities who had been making a name on YouTube by talking about stocks and investing. There was even a new name going around for the financially focused influencers who were popping up in response to the post-COVID trading mania: finfluencers.

Another hub of conversation about GameStop was StockTwits, a Twitter-like messaging platform focused on investing. StockTwits had been founded during the financial crisis and now had around three million active accounts, about twice as many members as WallStreetBets.

StockTwits was often the butt of jokes on WallStreetBets because the unmoderated nature of the service made it overwhelming and attractive to scams and spam. But StockTwits offered some advantages over WallStreetBets, like allowing users to filter the conversation for particular stocks. This made it easy for fans of GameStop to find each other and chat.

Alzmann and a handful of other GameStop-obsessed investors had come together on StockTwits over the course of 2020 and used it as a place to meet up and chat during the day. This group, whose members began referring to themselves as the GME Owls, had hatched plans on StockTwits to get GameStop in front of the much larger masses on WallStreetBets around Thanksgiving.

These conversations about GameStop showed the way that a whole new media ecosystem dedicated to investing was growing up far beyond the bounds of WallStreetBets as the COVID lockdowns continued.

But in the conversations on YouTube and StockTwits, there had been increasing recognition that WallStreetBets exerted a kind of gravitational pull that none of the other sites could touch.

“If 1% of the active traders on WSB picked up 20 shares for shits and giggles, there’s literally nothing left,” one of the regulars on StockTwits wrote as the GME Owls began fanning out onto WallStreetBets after Black Friday.

In the week after Thanksgiving, the GME Owls from StockTwits put up a survey on WallStreetBets so they could get a sense of how many people from this rowdy crowd were buying the stock.

The 2,400 people who responded suggested that they had, as a group, bought 3.4 million shares of GameStop. That was enough to make WallStreetBets the seventh-largest holder of GameStop stock, ahead of some of the big Wall Street investment firms that had shown interest in the stock.

Some of the guys in StockTwits were skeptical of the attention span and staying power of the Reddit crew. But during the week after Thanksgiving, GameStop took a dip, and it seemed only to strengthen the resolve of the growing hordes on WallStreetBets.

“It turns out that with a culture can come strong convictions,” one of the leading GME Owls wrote on StockTwits. “They actually ditched their option gambling ways and most have made a bid for shares to help the greater cause.”

The most useful information that the GME Owls had uncovered in the fall of 2020 was about Ryan Cohen, the young billionaire who had purchased millions of GameStop shares earlier in the year. Cohen had not said much about his purchase publicly, but in regulatory filings he indicated that he was looking to buy enough shares so he could join GameStop’s board and encourage the company to embrace the possibilities of e-commerce more fully.

Cohen had made his fortune by founding and running Chewy, an online pet store that was one of the only e-commerce start-ups that had successfully taken on Amazon. If Cohen could work his e-commerce magic on GameStop, the company might not be doomed by the rise of downloadable video games.

Alzmann and the other GME Owls obsessively tracked every new filing and bit of information from Cohen to see if he was moving ahead with his plans to remake GameStop. Alzmann went so far as to reach out to Cohen’s lawyers to let Cohen know that the people gathering on WallStreetBets were behind him.

On WallStreetBets, Alzmann shared the growing evidence that Cohen was indeed planning to take a more active role at GameStop. This led to a surge of memes that portrayed Cohen as the hero of the ordinary guys in their battle against the villainous hedge funds.

This crowdsourced research and cheerleading paid off mid-December when Cohen made his latest filing, a letter he had just sent to the GameStop board. The letter indicated that Cohen was getting much more aggressive in his effort to change the company and was not going to take no for an answer. When the filing was made public, the stock shot up and the subreddit celebrated the news as vindication of all their hard work.

On CNBC, Jim Cramer had been watching and talking about the rise of GameStop warily as part of his long-standing fascination with the rise of retail investing.

At first, GameStop reminded him of the February gamma squeezes when the crowds had manipulatively seized on silly stocks like Virgin Galactic.

But when Cramer dug into the conversation happening around GameStop on WallStreetBets, he saw that something new and more sophisticated was happening.

“What I say to myself is ‘Do not be a snob,'” he told his viewers. “If they’re running GME, then do some work on it. Make sure that you know GME.”

He said Wall Street was likely to continue viewing the Reddit and Robinhood crowds with the disdain that had marked most of the professional commentary to date. But Cramer said he was taking a different tack.

“The bottom line? I think it’s time to stop disrespecting the younger investors who’ve nailed 2020 every step of the way. Start taking them seriously, even at this incredible run. It’s not too late to join them.”

From the book THE TROLLS OF WALL STREET by Nathaniel Popper. Copyright © 2024 by Nathaniel Popper. Reprinted by permission of Dey Street Books, an imprint of HarperCollins Publishers.

Nathaniel Popper is the author of Digital Gold: Bitcoin and the Inside Story of the Misfits and Millionaires Trying to Reinvent Money.