“How I invested $750K and made $47 Million”

The wildest story of Wall Street..and how it unfolded!

Spoiler alert: I didn’t make the 47Million, Reddit user Keith Gill AKA ‘deepfuckingvalue’ did! But now that you’re here, go ahead and read about how some underdogs took down wall street and a couple of hedge funds and what they’re plotting next!

In all honesty, I had spent some time on Reddit browsing through this group called WallStreetBets, but like the rest of the world only started paying attention to the forum when a stock called GameStop was being traded aggressively and people on this group who were being called degenerates by the world were posting screenshots of how they had just made their millions. Yes, our man Keith below posted how his $750K made him $47Million.

Followed by this on 3rd February...down almost 50%...and so was his stake to $22Mil as of 3rd February.

This is how the company’s stock price moved..

Probably the biggest financial street debacle by far, but it was classic David VS Goliath, and the underdogs had a crazy ride. They’ve even sold the rights for this movie ALREADY to Netflix. But before the movie comes out, let me take a shot at deconstructing what happened for those who missed out on this story!

A big stock movement up or down is because of 1) Change in the fundamentals, earnings, new information about the market, market share etc that justifies the higher or lower valuation OR 2) Not related to fundamentals, but when the markets are rushing to buy or sell an asset to protect their financial positions. In the case of Gamestop, both forces acted together. Gamestop is a brick and mortar retailer of video games and its stock was struggling due to the pandemic. In fact, it became one of the most shorted companies in 2020. When an investor expects a stock price to go down, they “short” the stock. The investor borrows a share of the stock at the current price with the promise to return the share back by a future date. Basically, the investor is betting on being able to repurchase the stock at a lower price and then pocket the difference. During this period, the investor also pays interest on the borrowed share and puts up some money as collateral.

If the investor is wrong and the price of the share goes up instead of down, the investor will have to exit the position at the higher price and suffer a loss. 

As they buy to close out their short position, they increase the demand for the stock and thus, drive up the price. The losses resulting from the price increase are referred to as the “short squeeze”. 

On January 11th, 2021 GameStop announced that it was adding 3 new members to its board of directors, Ryan Cohen (the co-founder and former CEO of e-commerce company Chewy, which was acquired by PetSmart in 2017 for $3.35 billion!) and two of his former colleagues. The individual investors start flocking in as they expected that with Ryan onboard, GameStop could turn their business around. This was all a result of our friend Keith’s (aka deepfuckingvalue) active evangelization through his posts on the Reddit group and Youtube videos for individual investors to buy the stocks that hedge funds were betting against. He had been buying the stock since June 2019 with a belief that GameStop would start acquiring new customers with the latest game console releases. This can be called a form of ‘mob colluding’, which has become ever-so-possible with social media & the polarization it’s known to breed in the society. It got so rampant that Robinhood, a trading platform had to halt trading till they could successfully build up reserves needed for regulatory reasons by the Securities and Exchange Commission (SEC). They ended up raising $3.8Billion to cover this damage but also benefited from the new users 1M+ who downloaded the app thanks to the buzz. 

Then the group started colluding on different stocks, including the price of silver, which had reached an eight-year high. 

But as the people started booking profits from this crazy ride, the GameStop is down to $50 after causing a lot of carnage & making some people millions and same for Silver.

I’ll go to the extent to say that this isn’t the last time we hear of mobs i.e individual investors driving down hedge funds. In the age of decentralization, we will see many such events until we finally as a society embrace that our financial system is so broken that we need to migrate to a new system instead of fixing the current one. The case for cryptocurrency and decentralization was further strengthened as it exposed the faults in our current financial systems that the hedge funds have exploited for decades!

One thing is for sure, that knowledge and power is already decentralized - the rest shall follow.

"WSB traders are applying the same principles of the digital/crypto world to the stock market and they are loving the fact that the old schoolers are hating it," Mark Cuban said. "The old schoolers think they are smarter. They are not."

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