GameStop-Robinhood revolution: Stock frenzy echoes anti-establishment anger behind Trump’s rise, analysts say
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 President Donald Trump’s White House communications director for 11 days in 2017.
Analysts believe 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 Trump’s rise to political power and fueled a pro-Trump mob that stormed the U.S. Capitol three weeks ago in a failed bid to overturn his election loss to Joe Biden.
Why did shares of GameStop and AMC soar?
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.
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