GameStop-Robinhood revolution: Stock frenzy echoes anti-establishment anger behind Trump rise, Capitol riot
GameStop, a struggling video game retailer whose shares were trading at around $4 at the start of the coronavirus pandemic. By Thursday, the stock price had surged to more than $480 a share before leveling off and closing at $193.
“We are witnessing the French Revolution of Finance,” declared Anthony Scaramucci, a financier who famously served as Donald Trump’s White House communications director for 11 days in 2017.
Other analysts think Scaramucci, aka “The Mooch,” is right about the revolution, even if he cites the wrong country.
They see parallels between what’s taking place on Wall Street and the streak of populism that powered Donald Trump’s rise to political power and fueled a pro-Trump mob of insurrectionists who stormed the U.S. Capitol three weeks ago in a failed bid to overturn his election loss to Joe Biden.
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Weeks before the mob descended on the Capitol, Trump supporters refusing to accept the November election results took to social media sites like Parler and other internet forums and circulated plans for a mass protest in Washington that would coincide with the counting of electoral votes in Congress.
In the same vein, small-pocketed investors used the social media platform Reddit to launch their assault on Wall Street and drive GameStop’s stock price higher. Reddit users on a forum called “WallStreetBets” took matters into their own hands after hedge funds began unloading the struggling retailer’s stock through a process known as “short selling.”
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Not everyone is thrilled with the rebellion.
“If you want to call what happened at the Capitol a mob, you can also call what’s happening at GameStop a mob, too,” said Ken Kamen, president of Mercadien Asset Management in Princeton, N.J.
GameStop investors ‘playing with dynamite’
People involved in a large movement, whether it’s buying stock or instigating an insurrection, tend to get caught up in the moment and do things they otherwise wouldn’t do, said Robert Cialdini, a psychologist and expert on the science of persuasion and influence.
“People get swept up in this and are likely to follow the lead of the multitude,” Cialdini said. “And what you’re seeing is the multitude seem to be buying this stock, which implies that it’s worth something. And people then buy into it.”
Just like the protestors who stormed the Capitol, many small investors are buying GameStop stock without stopping to consider the consequences, Kamen said.
“How many of the protesters that stormed the Capitol actually thought the FBI would be hunting them down and threatening them with 20-year jail terms?” Kamen asked. “They were just going with the crowd. Everyone was doing it.”
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