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After lockdown orders of spring 2020 and the shattering global economy Reddit users of r/WallStreetBets, high-risk retail investors’ subreddit, immediately seized their opportunity to hit the stock market. People jokingly describe these virtual community members as a group of primarily lower-middle-class individuals who are no-hitters in society and who are desperate to find a way out. It has become a new training ground for would-be investors, thanks to apps such as Robinhood and WeBull that allow anyone with a bank account to become a trader. But how did this sub-group manage to grow to nearly 5 million self-described “autists” who inspired the SEC, scared the institutional investors, and “trolled” thousands of people?
Uncover the complete history timeline of WSB, RobinHood, GameStop, and Reddit investors with us.
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2012 – Origins of WallStreetBets
According to the Wall Street Journal, Jaime Rogozinski created the WallStreetBets subreddit in 2012 while working as an information technology consultant for the Inter-American Development Bank in Washington, DC. In the early 2010s, fellow investors told the 39-year-old resident of Mexico City that his “gambling-like” investing style wasn’t going to work. After that, r/wallstreetbets remained a small, niche community for the next few years. It took until 2017 for the sub to reach 100,000 subscribers, according to subreddit statistics. This period saw the sub still trying to find its identity, but it also saw a number of noteworthy incidents occur during this time.
2013-14 – Robinhood comes into play
Stockbroker Robinhood, based in the United States, allowing its users to trade without paying commissions through an app was established by Baiju Bhatt and Vlad Tenev, former Stanford roommates. The company was founded in Palo Alto, California, in April 2013. In a few months, the Financial Industry Regulatory Authority (FINRA) approved Robinhood to operate as a brokerage. Robinhood hoped to open up trading to a new demographic by eliminating fees and streamlining the process. In 2014, it launched the app for IOS devices.
2015-16 – WSB and Robinhood expansion
The main guy behind the WSB Reddit was Marty Shkreli, also known as the “pharma bro,” who is currently serving a seven-year prison sentence for securities fraud. In 2015, the new mentality was born among the WSB investors – You Only Live Once (YOLO), which quite angered Marty Shkreli, who believed that it undermined the main idea behind investing. YOLO meant that the Redditors were risking it all – placing high bets with low potential. At that time, WallStreetBets users reached 18,000, while Robinhood won Apple Design Award, launched its app for Android devices, and reached 67,000 daily users.
2017-18 – The first successful year
In 2017, the number of users on WSB exceeded 100,000, whereas Robinhood could count 200,000 active traders on its platform. Robinhood was already getting enormous attention, eventually becoming one of the unicorn start-ups with a first investment raise of 110 million US dollars in venture capital. At this point, the company was valued at 1.3 billion US dollars.
Robinhood Gold, a subscription-based service, was introduced in the same year. Users could now trade before the market opened and after it closed for $10 a month. This privilege was intended to entice more experienced traders away from other stock brokers by offering them a competitive advantage. The company introduced options trading along with other innovations. Chinese citizens also got a green flag from Robinhood to buy and sell U.S. stocks through an app integration with Baidu, as part of the company’s global expansion efforts. Meanwhile, WSB community members invested in AMD while claiming that the shares were undervalued. Their bets were in fact rewarded and pushed AMD stock prices up again.
In 2018, Robinhood registered 664,000 active traders, while WSB hit 300,000 users within the group.
2019 – The calm before the storm
In 2019, the WallStreetBets was already a trendy community on Reddit ranking second according to the number of comments per day. From time to time, WSB was N1 on Reddit, as well. At this point, Robinhood was a well-established trading platform that read a net worth of 7.6 billion US dollars. In 2019, the company attracted a further 323 million USD in funding. One of the most significant innovations of the year in Robinhood was the allowance to purchase the stocks in fractions.
In June 2019, the value of GameStop stock began to drop significantly as the poor performance of the company revenue was reported. The author of the popular movie “The Big Short” – Michael Burry announced its stake at GameStop which attracted the attention of WSB investors. In September, Keith Gill (DFV) shared his position on the WallStreetBets.
2020 – The great beginning
In early December, GameStop reported that its third-quarter net sales of 2020 were down more than 30 percent compared to the same period last year. Several factors contributed to the retailer’s sales decline, including an “11 percent reduction in-store base”. On December 9, GameStop closed at $13.66 a share.
Gill publicly endorsed GameStop stock way earlier than Wall Street and the global community took notice. A screenshot of his GameStop portfolio appeared on r/wallstreetbets in 2019. Christian Bale’s portrayal of legendary trader Michael Burry also influenced Gill and other members of the forum in making their investment decisions.
2021 – Main scene, plot twists and a grand final
Earlier in January 2021, GameStop announced the appointment of Alan Attal, Ryan Cohen, and Jim Grube to its board of directors. Through his private firm, RC Ventures, Cohen is the founder and former chief executive of the e-commerce platform Chewy, as well as one of GameStop’s largest and wealthiest shareholders. When Attal was CEO of Chewy, the company grew from three employees to more than 10,000. Prior to joining Chewy, Grube held various executive positions in the e-commerce industry.
In just a few days, WSB traders who were allegedly led by Gill began aggressive investments in GameStop shares. On Jan. 13, GameStop’s stock closed at $31.40 per share, up more than 50 percent since the announcement on Jan. 11.
One of the richest traders, Andrew Left’s firm, Citron Research, took aim at GameStop stock buyers in a tweet on the 19th of January. On that day, shares opened at $41.55. In a live stream scheduled for the next day at 11:30 a.m. ET, GameStop said that “buyers at this level are suckers at this poker game.” “Buy at your own risk,” Citron said on Jan. 21. “GameStop is going to buy $20 at your own risk,” Citron said. YouTube has since removed Citron’s video highlighting the reasons why GameStop will fail.
The closing price of the stock was $43.03 on Jan. 21. 2021, January 22 – GameStop’s sales increase by 50% It jumped up more than 50 percent on Jan. 22 as r/wallstreetbets became increasingly heated and GameStop’s support grew. That day, the stock opened at $42.59 and closed at $65.01. It continued to rise during the weekend late hours and pre-market trading sessions. It was priced at $96.73 when it opened on Jan. 25.
Elon Musk tweeted “Gamestonk!!” shortly after the markets closed on Jan. 26 linking to the popular forum. Chamath Palihapitiya, a well-known venture capitalist, had tweeted earlier that day that he was investing in the company. In after-hours trading, shares skyrocketed by nearly 140 percent. As of Jan. 27, the stock was trading at a whopping $354.83 per share.
On Jan. 27, 2021, r/wallstreetbets forum members Citron Capital and Melvin Capital, two major companies intending to short-sell GameStop stock, announced in a few days that they would close their positions.’Left of Citron Research’ posted the announcement on YouTube, saying that Citron Capital ‘lost 100%’ on its bets that GameStop stock would decline.
Trading platforms such as Robinhood abruptly restricted a great majority of transactions that involved GameStop stock on Jan. 28, according to the Wall Street Journal. Risk minimization is the goal, according to TD Ameritrade. A similar argument was put forth by Robinhood. However, it later clarified that the decision had been made based on “ten-fold” increases in deposit requirements. Stocks peaked at $483.00 intraday before plummeting to $112.25 by the end of the day.
What about WallStreetBets today?
During the wild short squeezes of January, Wall Street was on its heels. WallStreetBets became a household name after the events of the late 2021 winter season. Users took advantage of the message board’s irreverent and insider tone to trade tips and rail against the unfair market structure that favored large banks and funds. “Apes” were coined to describe retail investors, “Diamond hands” were used to hold on to short squeeze stocks, and chicken tenders (“tendies,”) were used to describe trading profits.
However, the site’s popularity has waned since January, when its moderators came under fire. While at that stage the number of users exceeded 10 million, they kept falling afterward due to inconsistent enforcement of the rules. WallStreetBets’ split has led retail investors to new platforms and subreddits that are more concentrated on investing, and individual stocks, similar to Robinhood’s exodus. Even GameStop investors have been able to create their own boards, such as r/Superstonk, which began in March and now has 485,000 members.
