Skip to main content
Canada’s most-awarded newsroom for a reason
Enjoy unlimited digital access
$1.99
per week
for 24 weeks
Canada’s most-awarded newsroom for a reason
$1.99
per week
for 24 weeks
// //

Pedestrians pass a GameStop store on 14th Street at Union Square in the Manhattan borough of New York on Jan. 28, 2021.

John Minchillo/The Associated Press

Remember the movie Trading Places?

The hit comedy from 1983 features Eddie Murphy and Dan Aykroyd as unlikely buddies who corner the market on frozen orange juice concentrate futures. Their goal is to make a fortune while doing serious damage to wealthy investors – the Duke brothers. Trading Places, loosely based on the Hunt brothers’ failed attempt to manipulate silver markets in 1980, captures everything you need to understand about the wild moves in shares of GameStop Corp. (GME-N), BlackBerry Ltd. (BB-T) and a handful of other stocks that have built massive followings among online investors.

As in the movie, these price swings are playing out swiftly, and the motivation is as much about socking it to the rich as making a buck. However, the money being made and lost in trading stocks is very real. And unlike the feel-good movie, the drama around GameStop or BlackBerry speaks to an anger and cynicism among many retail investors that bodes poorly for capital markets.

Story continues below advertisement

Social media-driven trading frenzy has tax implications

High-flying stocks crash to earth as trading platforms hit the brakes

Silver, precious metal mining shares the latest hit by Reddit-fuelled volatility

GameStop is a great David vs. Goliath story, but no blueprint for investing success

How did the Reddit stock market rally happen and why did it start to fizzle on Thursday?

Read their posts on websites such as the Reddit forum WallStreetBets, and you find individual investors who piled into GameStop over the past month were motivated in part by a desire to cause pain at high-profile hedge funds. They targeted funds such as Melvin Capital and Citron Research, which were betting the video-game retailer’s share price would fall by short selling its stock while talking about their positions on social media.

The Main Street crowd soundly beat Wall Street’s finest. GameStop’s share price soared and the hedge funds abandoned their positions this week after booking significant losses. Melvin Capital needed a US$2.75-billion bailout from two other hedge funds.

Robinhood and other online brokerages moved to limit trading Thursday in GameStop, BlackBerry and a handful of other stocks, citing justified concerns over their volatility. This prompted investors on Reddit to complain of a conspiracy between the trading platform and hedge funds. That doesn’t hold water. Robinhood’s brand, based on democratizing finance, is far too important to risk on a favour to fund managers. The company only limits trading if its operations are in jeopardy.

On a smaller scale, investors indulged in the same sort of conspiratorial theories when The Globe and Mail published articles that pointed out BlackBerry’s stock price had tripled in three weeks. The move, which came after the Reddit crowd got behind the stock, prompted the software company to put out a press release stating no material changes had taken place, while several investment banks restated price targets that were well below where the stock was trading.

“What you fail to miss (sic) in your research is a myriad of information about the current BlackBerry value proposition that has been suppressed by banks and Wall Street for years,” said a BlackBerry shareholder in an e-mail on Tuesday. The company’s share price dropped by 40 per cent on Thursday. The idea that companies, the media, banks and fund managers somehow suppress information, to the detriment of individual investors, is simply ridiculous.

The market event that goosed GameStop and BlackBerry this month is known as a short squeeze. Another one played out in the silver market 40 years ago, and there was another at Volkswagen Group in 2008 – the automaker was briefly the largest company in the world. More recently, in 2018, the shorts were squeezed at cannabis producer Tilray Inc.

What’s changed today is the size of the market move, or the scale of the squeeze, factors driven by social media and platforms such as Robinhood that offer free trades. Tilray chief executive Brendan Kennedy said on CNBC this week that short sellers likely lost US$600-million on his company, “which actually pales in comparison to what I’ve been reading about GameStop.”

Story continues below advertisement

When the Hunt brothers tried to manipulate the silver market, the U.S. government stepped in, changing the rules to limit abusive behaviour. Today there’s very little authorities can do to contain the anger and greed that underlie recent short squeezes. As Mr. Aykroyd’s character said in Trading Places, as he strode into the futures trading pit, “Nothing you have ever experienced will prepare you for the absolute carnage you are about to witness.”

Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening. Sign up today.

Your Globe

Build your personal news feed

  1. Follow topics and authors relevant to your reading interests.
  2. Check your Following feed daily, and never miss an article. Access your Following feed from your account menu at the top right corner of every page.

Follow the author of this article:

Follow topics related to this article:

View more suggestions in Following Read more about following topics and authors
Report an error Editorial code of conduct
Tickers mentioned in this story
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

If you do not see your comment posted immediately, it is being reviewed by the moderation team and may appear shortly, generally within an hour.

We aim to have all comments reviewed in a timely manner.

Comments that violate our community guidelines will not be posted.

UPDATED: Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies