Like many other people, Diaz first invested $3,000 after reading about the video game retailer’s stock on the popular Reddit forum WallStreetBets. The so-called “Reddit rally” to squeeze shortsellers rocketed GameStop Corp shares from below $18 a share in early January to as high as $483 last week. Diaz sold some to take profits of $1,500 and hold on to the rest, 10 shares.
After watching the shares plunge on Thursday to close at $53.5, Diaz said he plans to buy more if the price keeps dropping.
“At first it was investing in an idea,” said Diaz. “But then after all the shenanigans when retail investors who wanted to purchase were prevented from doing it, it got personal. So I’m just going to hold until it plays out.”
The wild swings of GameStop and other Reddit rally favorites were cast as a David versus Goliath tale of individuals taking on Wall Street hedge funds. With trading volume swelling last week, online broker Robinhood and other investing apps placed restrictions on GameStop and other shares.
The fierce rally damaged some hedge funds when they could not cover short positions. Still, many people on Wall Street have also made money off GameStop, while some small investors were hurt by its rapid decline.
Many financial professionals had warned the rally could not last forever. Still, lawyers said their phones have been ringing with GameStop shareholders hoping to recoup losses. Even during this week’s swoon, many recent Reddit posts pledged to hold GameStop until the stock goes “to the moon.”
“IF HE’S STILL IN, I’M STILL IN”
Those who were late to the party are likely looking at losses, if they did not hedge their long positions somehow.
John Gjolaj, a restaurant manager in New York and longtime user of Reddit’s WallStreetBets forum, invested in over 300 shares of GameStop last week at $269 a share. He plans to hold on. Gjolaj said he believed GameStop’s team can turn around the company.
“I’m hoping I can sell it at $500 or so. But if it takes years, I’ll be holding,” Gjolaj said. “I invested in bitcoin at its height in 2017. I can stomach all this volatility.”
Jerry Corley, a gardener in Arkansas, joined WallStreetBets’ thread on Reddit last week and bought three shares of GameStop on Monday. Looking at a loss, he has drawn encouragement from Roaring Kitty, the online handle of an investor who championed GameStop and whose posts claimed he turned an investment of a few thousand dollars into millions.
“He has got his money where his mouth is. This guy’s no dummy. That’s a great sign right there,” said Corley.
On Wednesday, Roaring Kitty, also known as DeepF***ingValue on WallStreetBets, posted a screenshot on Twitter of the GameStop stock, which was traded at around $4 in July, adding “I like the stock.”
Keith Patrick Gill, a trained financial advisor who is behind the Roaring Kitty streams, did not respond to a request for comment. His recent posts show he still holds a position worth over $8 million in the stock.
Some followers on Reddit posted after his Wednesday tweet: “If he’s still in, I’m still in.”
CALLS TO LAWYERS
Diaz tried to get around Robinhood’s trading restrictions by using several trading platforms. But the trading limits quickly drew a backlash from investors and U.S. lawmakers from both parties, and have also sparked lawsuits.
Levin Papantonio Rafferty attorney Michael Bixby said his firm has gotten dozens of calls with “every sort of complaint you could imagine” related to Robinhood’s handling of GameStop trading.
“If you lost $10,000, that might be a heck of a lot of money to the individual but it would be difficult to justify the cost of litigation,” Bixby said.
A representative for Robinhood declined comment on the lawsuits. Previously, the online broker said the trading restrictions were put in place to because of the collateral it needs to post required by clearinghouses to backstop many of the trades.
Matthew Schwartz, attorney at Kass Shuler in Florida, said most of the calls he received were from individuals trading options that could not buy, or who had traditional equities that were restricted.
The Reddit rally also had winners that remain in play. Bryan Towey, a 20-year-old entrepreneur in New York, said he made over 890% returns on GameStop since he invested in 10,000 shares at an average cost of $22.10 per share in early January after reading about the company’s e-commerce sales growth.
Towey has gradually sold his holdings since it hit $165, but still owns 2,200 shares, in the hope for another breakout.
“I’m like a gut investor type of person,” Towey said. “I have a good feeling about the business. If there is another bubble, I’ll probably get rid of it.”
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