Day Traders Turn Social Media Platforms into Squawk Boxes
Social media chatrooms are beginning to resemble the squawk boxes on old-fashioned trading floors, as a new generation of retail traders continues to gain influence over the stock market.
While attention has focused on the Wallstreetbets Reddit page that helped send shares of GameStop Corp and AMC Entertainment Holdings Inc soaring, thousands of “amateur” investors have also been congregating on Facebook, Instagram, WhatsApp, Signal, Telegram, Discord, Clubhouse, Slack, and other platforms to trade tips away from the public eye, posts shared with and seen by Reuters show.
For example, Rapper 21 Savage’s manager, Stone Mound Meezy, started a Clubhouse room on Wednesday to celebrate earning $40,000 in GameStop options. It quickly filled with more than 1,200 participants who encouraged newbies to jump into other investments, including Nokia Oyj and cryptocurrencies.
“If I make $100K because of this goofy *ss room … OOOOH WEEEEE,” Meezy wrote after investing in Nokia at their suggestions and seeing he was in the money.
In another Clubhouse room, venture capitalist Mark Monroe urged 2,500 members to stay away from “meme stocks” that he believed could crash by the end of the week.
At the same time, on Instagram, 23-year-old Albert Sampouw, a.k.a @kevin.trades, and his partner, Mihir Sukthankar, promoted their Discord group to their combined 160,000 followers after posting a screenshot of a 563% gain on an AMC investment.
The pair post watch lists and stock opinions on their page for free but charge up to $2,000 to join a community of 8,000 members called Traders Circle X, offering mentoring and post alerts when they buy a particular stock.
“I don’t want to call it to advise because we’re not professional advisors,” 19-year-old Sukthankar said. “But the free content that we’re putting out, a lot of people in the trading community find value in.”
Generational Shift
The idea of using social media for investing is far from new. Popular platforms from the 2000s include Bogleheads, Yahoo Finance, and StockTwits.
The recent phenomenon takes the medium further because of a generational shift where people feel more comfortable touting investments online, and trading apps like Robinhood geared towards first-time investors, experts said.
Besides, the new influencers see themselves as rebels and educators leading disenfranchised communities to economic freedom, rather than greedy tipsters looking for a quick buck.
“It’s a collaboration, and that’s where the magic happens,” said Jannick Malling, co-founder of Public, a trading app that combines brokerage services and social media.
The surge of video retailer GameStop started when Ryan Cohen, the founder of popular pet-products site Chewy, faced off against hedge-fund managers who had shorted the stock. The broader Reddit group decided to support GameStop and a few other stocks, battling what they characterized as a corrupt system run by wealthy “professional” investors.
Hedge funds have had to backtrack short positions in recent days as GameStop’s price has soared ever higher.
As institutional players and regulators start to talk about the need to investigate social media’s role in the stock price leaps, deeper battle lines have been drawn.
It is Reddit against The Man, supporters say.
Supporters like entrepreneur Mark Cuban have touted the Wallstreetbets success as a counterweight to high-speed trading firms that have technological advantages against individuals.
“I LOVE LOVE what is going on,” he wrote on Twitter on Wednesday night.
I got to say I LOVE LOVE what is going on with #wallstreetbets. All of those years of High Frequency Traders front running retail traders,now speed and density of information and retail trading is giving the little guy an edge. Even my 11 yr old traded w them and made $
— Mark Cuban (@mcuban) January 28, 2021
The retail victory could be fleeting if stocks promoted on Reddit fall remarkably, plenty of amateur investors could get badly burned. For now, they are enjoying their moment.
In his Clubhouse room on Wednesday, Meezy said multiple times that he was not an expert. When offering the ticker to Nokia, he accidentally suggested the code for Nikola.
Followers laughed off the mistake and stayed bullish.
“It’s only day three of the retail extravaganza,” one said.
(Reporting by Imani Moise; Writing by Lauren Tara LaCapra; Editing by Sonya Hepinstall)
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