Gamestop Is FOMO Powered by Reddit and Elon Musk
At the Last Futurist, we’ve been talking a lot about social amplification and its dangers this year. However Gamestop is a story of the mob, gambling and celebrities like Elon Musk stoking the absurdity.
After a tweet by Elon Musk, the stock price of GameStop (usually worth $12), went up 95% to as high as $247. Now the SEC has to look into this, but what can it do? It can’t regulate Reddit, YouTube, Twitter, Stocktwits and dozens of other apps simultaneously, can it? Social media amplification is out of control.
At these prices, Gamestop (a failing company) is worth more than many S&P Stocks and just when you wanted the gambling game to stop, Elon Musk stoked it.
Shares of GameStop, which jumped 92.7% Tuesday, were up more than 60% in after hours trading following Musk’s tweet, which linked to the “wallstreetbets” Reddit chat room with over 2 million subscribers.
The Tesla CEO tweeted “Gamestonk!!” Never the most mature person in the room, Elon is an enemy of sorts of the SEC after a long history of controversial tweets. But don’t expect him to get banned from Twitter. He is a cash cow there with millions of followers.
The Gamestop story gets more interesting when you realize it’s not just $GME, but $AMC and a host of other very shorted stocks. It’s a herd activism, if you will, that has a place, perhaps a temporary place in the crazy bubble of the stock market the Fed has created in 2020 and that is now even worse in 2021.
By doing this, Elon Musk sets up a lot of FOMO gambling folk to fail and be bag holders without any possibility of ever getting their money back.
The Reddit subreddit to blame is https://www.reddit.com/r/wallstreetbets/ here. It’s also showing the more dangerous side of social amplification and social media. It’s not a riot but it is skewing the stock market in a significant way.
I had just written a poll about whether Elon Musk’s power on twitter was justified. So imagine my surprise. But that’s just the thing, I’m not surprised. Elon Musk does abuse his “influencer” status, each and every time.
As for the poor fools buying up $CME, I can only pray for them. $GME stock was $147.98 at the close today, and after Elon Musk’s tweet it’s $217.81 at the time of writing, up about 47% in after hours trading.
The stock surged earlier in the day after Social Capital’s Chamath Palihapitiya said in a tweet that he bought GameStop call options, betting the stock will go higher. With Chamath and Elon manipulating it further, one can understand how the social amplification issue of social media regulation is becoming more serious. If billionaires can manipulate us so easily, what is the world coming to?
Musk’s history of abuses of his Twitter account is well documented, yet curiously while Twitter goes on a censorship binge, Elon Musk’s name has not come up. Imagine that! If you want to get in to the trade, forget it, you are way too late. Try other well shorted stocks that the same Reddit community is likely to squeeze up. Try AMC, Blackberry or Bed Bath and Beyond, but approach with extreme care, in this case it really is gambling.