Canadian investors who made bets on GameStop Corp. shares during the remarkable trading frenzy in late January and early February were mostly male millennials and mostly unsuccessful in their trades, according to an analysis from Wealthsimple. The good news: Most of the losses were relatively small.
Wealthsimple, the Canadian investing app that offers free stock trading in Canada (along with low-fee online money management), analyzed its own user data for the period between Jan. 15 and Feb. 15. During this one-month period, GameStop’s share price surged as much as 1,260 per cent amid a spike in volume and widespread interest in so-called meme stocks, fuelled by a flood of supporters on Reddit. The shares have since fallen more than 90 per cent from their intraday record high.
The frenzy has attracted the attention of U.S. regulators and lawmakers, who are probing the roles of online chat rooms and brokerages. It has also raised concerns over whether the broader stock market is in the grips of a speculative fervour driven by inexperienced investors capable of jumping on dangerous trends that have no relationship to fundamentals.
While new investors signed onto Wealthsimple’s trading app in record numbers during the frenzy, Wealthsimple’s number-crunching – published in its magazine – suggests that investors using the app to buy and sell GameStop kept their exposure to GameStop fairly limited, and as such were insulated from heavy losses, for the most part.
About 14 per cent of Wealthsimple’s clients traded GameStop shares during the month-long period, with the average investing experience of 1.5 years. Though the figure is based on self-reporting, it challenges the assumption that these traders were brand new to the game.
The GameStop traders were 84 per cent men, and 63 per cent of the traders were millennials, with a further 29 per cent Gen Z, according to Wealthsimple.
A third of investors bought a single share of GameStop, while 75 per cent of investors bought five or fewer shares. Just 19 per cent bought seven shares or more.
According to Wealthsimple, 67 per cent of investors using its app to trade Gamestop shares lost money. Yet, the losses were relatively small: 86 per cent of investors lost less than $1,000.
Still, there were outliers here: 3 per cent of investors trading the shares lost $5,000 or more – adding to some of the horror stories emanating from the United States and no doubt adding to concerns over whether current regulations adequately protect the interests of small investors.
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