Reddit traders who have successfully profited off GameStop (GME) stock are now turning their attention to struggling movie theater chain AMC. Reddit board r/wallstreetbets has helped push GameStop stock to record levels in recent days, with the stock closing up 92 percent yesterday alone. It’s part of a chaotic, meme-fueled effort to create an organized short squeeze, and force traditional hedge funds into losing millions of dollars on their bets against struggling companies.
AMC appears to be next on the list. Overnight, online traders at r/wallstreetbets’ Discord server spent hours creating memes and spamming AMC emoji in an effort to convince thousands of people to buy AMC stock. Hundreds swarmed rapper Soulja Boy’s live Twitch stream in a failed endeavor to get him to tweet about AMC. At one point in an ongoing Discord call — with dozens of participants shouting profanity and racial slurs — traders thought Elon Musk was on the call. After many called for quiet and to “let Elon speak,” everyone soon realized it was just a prankster using a fake Elon Musk sound board.
It was a surreal moment in what has become the hottest online game.
The AMC memes appear to be working, though. During pre-market trading, AMC was up more than 400 percent at one point before opening up more than 250 percent. The movie theater chain has struggled with pandemic-related losses, but it did raise more than $400 million in financing on Monday to help it stay afloat through 2021.
Nokia, BlackBerry, and Bed Bath & Beyond are also seeing stock rises that are likely linked to this Reddit group. Nokia stock is currently trading up 63 percent, with BlackBerry up 17 percent, and Bed Bath & Beyond up 35 percent.
The mob of investors are taking part in this incredibly high-risk game in an attempt to punish hedge funds and professional financiers and make some quick cash. Thousands are buying into the idea of pummeling Wall Street professionals, and they’re using Reddit, Discord, Twitter, and Twitch to sell more people on gaming the system.
It works by targeting stocks that have a high amount of short selling attached to them, which is why GameStop and AMC are great targets after struggling through the pandemic. Short selling is a process that lets traders borrow shares for a fee and then sell them for a high price, and buy them back at a lower price to return them. Reddit is trying to force the price up so that investors, and especially hedge funds, that are short selling will lose lots of money as the stock rises. Read our full explainer on how Redditors are gaming GameStop stock.
It’s a risky game that highlights a bigger battle over the future of finance, and the idea that you can do anything online. The vast majority of Reddit investors are young and see hedge funds as the old school controlling stocks and shares and bullying companies into administration through their positions. As one poster on r/wallstreetbets put it, it’s “a tug of war between tradition and the future” that has gotten really personal. “We need to take the wealth back from these boomers,” said one member of the Discord call encouraging investment in AMC.
Investing and trading has also become incredibly easy for amateurs, thanks to apps like Robinhood. Millions have used Robinhood to make commission-free trades, and it’s a practice that has become popular during the pandemic with millions stuck at home.
This online trade game also has real life consequences. One big hedge fund, Melvin Capital, has been forced to close out of its GameStop position today with a huge loss expected, likely in the millions of dollars. It’s not clear if we’ll see the same sequence of events with AMC, but Reddit is trying to make it happen.
Update, January 27th 11:50AM ET: Article updated with information on other stocks seeing boosts.