Tennesseans buy into GameStop trading frenzy

By: - February 2, 2021 3:59 am
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Even if you haven’t picked up a video game controller in years, you’ve likely heard about the historic market debacle involving GameStop and a few other select companies Reddit users have been purchasing stock in. 

The subreddit WallStreetBets, a sort of community for amateur investors and day traders, came together in a united effort to purchase as much of GameStop as possible, expecting to make a profit by playing hedge funds who’ve been shorting the stock for weeks. The national news cycle fixated on this laymen’s market upheaval last week, and since then trading apps like Robinhood have limited purchases of GameStop to protect hedge funds from going under—making free market proponents and even politicians from opposing parties irate.

Tennesseans have invested in the handful of stocks Redditors decided on, including AMC and Nokia. Their motivations vary, and at least one expert is worried the everyday investors will actually lose money in hopes of sticking it to “the man”. But like so many who’ve bought in the rallying cry, at least for now, seems to be “Hold!” Some Tennessee investors have less and less regard for profit and more interest in sending Wall Street moguls a message.

John Dennis, 29, of Nashville, says he has been using the Robinhood trading app since joining the WallStreetBets subreddit last summer. Dennis says he invested roughly $4,800, purchasing 93.5 GameStop shares for $67 each. GME is currently trading at more than $300 per share. Dennis says that the stress of the situation and a lack of faith in Robinhood prompted him to sell his shares Friday before market close. On top of his initial investment, he made about $25,000 and may buy in again if prices drop. Dennis says the stock has been incredibly important because he’s a singer-songwriter with no retirement plan, and he wants to become a long-term investor.

Dennis says he appreciates that Tesla CEO Elon Musk, celebrity investor Mark Cuban and others either tweeted their support or bought GME stock themselves. He says not all hedge funds are bad, but some let their short stock strategy affect a company deeply.

These guys shorted GameStop into oblivion, and now they have to pay the piper,” Dennis said in an email statement.

Matt Formisano (Photo: Submitted)
Matt Formisano (Photo: Submitted)

Matt Formisano, also 29 and from Nashville, invested much less in GME stock but is holding on to it regardless. He was only able to purchase about $100 in GME because he uses Robinhood to trade. Since Formisano began purchasing the stock only a few days ago, the Robinhood GME limit meant he couldn’t get additional shares. Formisano says he’s been using the trading app for about a year and as of Friday morning, could no longer purchase GME stock. He says that since hedge funds manipulate the market by shorting stocks, blue collar workers should be able to participate in the free market and invest in whatever they want. He’s angry that it isn’t happening anymore.

Formisano says he’s actually lost about $15, but doesn’t mind. Unless something drastic happens to the stock price, he’ll probably hold onto it.

“I’m in for the long haul,” Formisano says. “I can’t stand hedge funds and the billionaires on Wall Street.”

Whether this sentiment, or Mark Cuban’s encouragement to “get long and get loud,” will actually cause long-term effects on either hedge funds or the market in general remains to be seen, according to Leona Edwards, CFP® and Tennessee-based wealth adviser. Edwards says she’s worried investors may lose their money in the end.

Edwards says that while it’s best to speak with a CFP on your own and do adequate research before making investment choices, she would consider putting limit orders on purchases so if the market falls, investors can still make some profit. Edwards also says that it may be a better long term strategy to invest in companies with better fundamentals, like a solid balance sheet, good leadership and good company governance.

I don't know if (Reddit investing strategies) are going to work out. You really want to get in on it and stick it to the man, but at the end of the day, you've stuck it to yourself.

– Leona Edwards, CFP, wealth advisor

For readers who are new to the market, Edwards also explained what a short stock is and how hedge funds make money on them, saying that it’s like buying a car. If you borrow a friend’s car for a week, then sell it to a dealership, and then buy it back on clearance for less money, you’ve made a profit and can still return your friend’s car. Shorting a stock is the same; a hedge fund borrows a stock, making the promise to return it. They only make money when the price of stock goes down, and they’re able to re-purchase it at a lower rate.

Edwards says that the group of Reddit investors probably won’t make a lasting dent in this practice, and she doesn’t want them to end up in a difficult position.

“I don’t know if that’s going to work out,” she says. “You really wanted to get in on it and stick it to the man, but at the end of the day, you’ve stuck it to yourself.”

Still, Tennesseeans who’ve bought into the stock craze are determined to send a message and are hopeful their investments may change the market in a positive way, for good. According to reports, the White House is “monitoring” the situation, as is the Securities and Exchange Commission, or the group in charge of watching the stock market and protecting investors.

Lawmakers including Alexandria Ocasio-Cortez and Ted Cruz have both expressed disdain over Robinhood’s decision to limit stock purchases, and in general, the subreddit users are proclaiming their intent to “go to the moon,” and refuse to sell their stock as the hedge funds seem to want them to. On Jan 26, one hedge fund closed their position on the company after getting a nearly $3 billion bailout to stay afloat.

Formisano says he hopes all this will have a lasting impact.

“I want this to be a wakeup call to society as well as firms and hedge funds,” Formisano says. “If they do try to screw with people, the masses can finally beat the one or two at the top.”

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Lonnie Lee Hood
Lonnie Lee Hood

Lonnie Lee Hood is a queer Nashville-based writer covering justice, LGBTQ issues and more. They are an amateur roller-skater and live with their hedgehog, Noodle, and three-legged cat, Tom. They are writing a debut novel and have published poetry and sci-fi/fantasy short stories.