How Reddit Keeps GameStop Alive
GameStop stock has made a notable comeback this year, and despite significant losses during the first wave of meme-stock mania, many traders remain undeterred, still enticed by the potential for substantial gains from the beleaguered video game retailer. With the stock up approximately 43% year-to-date, peaking at a 178% increase in May during the 2024 rally, interest has been rekindled among retail investors.
The resurgence in interest can be attributed to Keith Gill, also known by his social media moniker “Roaring Kitty.” Gill, who became famous during the original meme-stock surge, resumed posting about GameStop on X in early May. His renewed activity included sharing screenshots of his brokerage statement, showcasing a $116 million stake in the company. According to data from the end of March, Gill’s 9 million shares made him the fourth-largest holder of GameStop stock. His return to the public eye broke a years-long silence and revitalized the meme-stock community on Reddit and other forums.
Business Insider interviewed several retail traders, who chose to remain anonymous, about their experiences and the impact of their previous losses on their current investment strategies. Despite the financial setbacks, these traders are still drawn to the potential high returns that GameStop offers.
Dan, a 29-year-old retail investor, jumped into the meme-stock frenzy in 2021. During the pandemic, he invested around $40,000 in GameStop after being influenced by promising discussions on the subreddit r/WallStreetBets. At its peak, his stake grew to approximately $200,000 before the stock plummeted. Ultimately, Dan sold his shares at a loss, as evidenced by brokerage statements reviewed by Business Insider.
“I found a lot of Reddit users, particularly on the Wall Street Bets community, come up with all this sort of diligence and research about GameStop. Then I kind of went down that rabbit hole,” he said about his initial investment in GameStop. “When the stock dropped from the $300 range back down to the $100 range, it was a crushing blow to my spirit and everything.”
Dan admitted that it never occurred to him to sell his shares when GameStop reached its peak. The allure of the stock potentially soaring even higher was too strong. “I drank the Kool-Aid, so to speak, of the Reddit community and the GameStop zealots,” he explained. “The fear of missing out was so high that at the time, there was no part of me that even considered selling. In retrospect, it would have been a good call.”
Dan’s losses were so severe that he sought therapy to cope. Despite this, he couldn’t resist buying more GameStop shares when the stock surged again this year. This behavior highlights a common sentiment among meme-stock investors: the belief in the possibility of significant returns outweighs the fear of repeated losses.
Another trader, Tom, echoed similar sentiments. He initially invested in GameStop during the first meme-stock wave, experiencing both significant gains and subsequent losses. Tom’s fascination with the stock persisted, driven by the potential for substantial profits and the community’s unwavering enthusiasm. “It’s like chasing a high,” he admitted. “The possibility of hitting it big is always there, and that’s hard to walk away from.”
The meme-stock phenomenon, epitomized by GameStop, illustrates a broader trend in retail investing where emotional and psychological factors often override traditional investment logic. The community aspect, combined with the fear of missing out (FOMO), creates a potent mix that keeps traders coming back, despite previous losses.
Key Takeaways:
- GameStop has seen a resurgence in 2024, rising 43% year-to-date, with a peak increase of 178% in May.
- Keith Gill’s renewed social media activity played a significant role in reviving interest in GameStop.
- Despite substantial past losses, retail traders are still investing in GameStop, driven by the potential for high returns and community influence.
- Emotional and psychological factors, including FOMO, play a significant role in the decision-making process of meme-stock investors.
- The community aspect of meme-stock trading creates a strong allure that keeps investors engaged despite previous setbacks.
Conclusion: The ongoing saga of GameStop and its impact on retail traders underscores the enduring appeal of meme stocks. Even in the face of significant financial losses, the prospect of substantial gains and the influence of a passionate community continue to draw investors back. The emotional and psychological factors driving these investment decisions highlight a unique aspect of modern retail trading, where traditional financial logic often takes a backseat to the thrill of the chase and the fear of missing out on the next big opportunity.
