You likely know the outlines of the story — hedge funds placed huge bets on GameStop’s stock falling, retail investors (in other words, people not allowed anywhere near a hedge fund) decided to work together as buyers to make the stock rise and — shedding no tears — punish all those wealthy short-sellers. These small-time investors crushed the long-held sentiment that it’s futile to try to outplay the big money on Wall Street. If you can’t beat ’em, join ’em . . . and then beat ’em.
I taught myself about investing 15 years ago and have been inspired and enthused to see retail investors flood the stock market. This is mostly thanks to Robinhood, the brokerage that pioneered commission-free trading.
Retail investors, like me, no longer have to lose our hard-earned coin paying $6.95 per trade. With a free trading app, we can grab a stock tip from Reddit or TikTok, click a few buttons and bam — we’re in the game. But, Robinhood is not without its problems. It shut out GameStop buyers on Thursday, inspiring talk of dark Wall Street conspiracies, but the move apparently was necessitated by a liquidity crunch caused by all of the volatility. After raising a billion-dollar investment and a $500 million line of credit overnight, Robinhood unfroze GameStop stock purchases on Friday and the rocketing resumed.
Yes, there is the possibility, some would even say the probability, that we retail investors will get hurt when the GameStop stock settles down. That’s a risk of investing. Plenty of institutional investors on the GameStop buy side, including BlackRock, are also taking a risk. The difference is that these are individual Americans exerting their will. If hedge funds have decreed that GameStop’s stock is a loser, are we all supposed to salute?
We’re a new class of investors, with access to powerful markets. And the GameStop short squeeze — as with stock for BlackBerry and the AMC theater chain — underscores just how much power we have to collectively move these markets. I suspect that a big part of the stock market’s sky-high valuation and rampaging bull run is thanks to retail investors.
Now, it is no coincidence that the newly democratized finance industry has grown in tandem with something far less inspiring. The bullish stock market has only poured more riches into the laps of the 1 percent. The pandemic has been rough for the average American, but our billionaires got a lot wealthier.
Inequality has been out of control for years, but when millions of Americans suddenly lost their jobs while David Geffen types rode out the virus on their megayachts and vast estates, it went from the background to blaring in our faces faster than you could say “tone-deaf.”
The uber-rich will always exist. The problem is that many powerful people — those who govern the country, run its companies and exert influence — received that power as a result of their wealth and privilege (or often their parents’ wealth, because compounding works like gangbusters when you’re already swimming in piles of money).
Or, worse, the uber-rich are pulling political strings to help themselves get even wealthier. The Post’s Christopher Ingraham explains that America’s extreme wealth gap is “consolidating power in the hands of the nation’s billionaires, who are increasingly using their riches to purchase political influence.”
Could a solution exist with us, the retail investors, buying five stocks here and 50 stocks there? Collectively, millions of us could exert control with our buying power and potentially shift the balance of power.
Now consider using that collective power for social good, as a way of signaling support for — or, alternatively, of boycotting — a company’s goods, services or business practices, but doing it with stock and options. For a boycott, investors could even double down and buy shares from a competitor.
If a corporation’s stock plummeted 20 to 30 percent in a single day, that would send a clear and resounding message to its board of directors, principal shareholders and senior leadership team, i.e., the decision-makers.
Publicly held companies answer to these entities, and what these entities care about is stock prices. Companies are often more beholden to shareholders than to their employees, even if some are attempting to shift that paradigm. And to C-level executives, the public “optics” matter.
I hope my fellow retail investors will make GameStop just the start — and use our newfound power to help companies and corporate leaders find a conscience. Eventually, they’ll start listening and understanding that putting their communities and their employees first can improve business and still benefit shareholders.