The Problem with Stocks
The GameStop Stock Saga and the Mystery of the Missing Buy Button
We all “follow the stock market” in the sense that cable news blasts its every tiny creep up or down across the screen as if our lives depend on it. But most people never actually pay close attention to the inner workings of the stock market and the nitty gritty of what financial firms are up to.
That all changed in 2021, when a motivated group of retail investors — who people in the finance world commonly refer to as “dumb money” — got smart and figured out the system wasn’t at all transparent or fair. In subreddits and other internet communities, investors started putting two and two together and realized that hedge funds were shorting certain stocks and decided to beat them at their own game.
Who are these apes you speak of?
The apes (an acronym for All People Equal) are a community of Reddit users who bought up GameStop stocks after they realized they were being heavily shorted by hedge funds. Shorting basically means that these hedge funds were placing big bets that GameStop’s stock price would go down.
By going on a GameStop stock shopping spree, the apes caused the stock to go way up instead. They’d hold the stock for a bit, make some money, and the hedge funds who’d shorted the stock would realize massive losses. It all worked a little TOO well and the whole saga ended up exposing giant faults in the stock market.
Bye bye, buy button
The GameStop stock surge caused such a frenzy that one day e-brokerage app Robinhood, where most of this buying activity was happening, suddenly stopped allowing users to buy GameStop stock. No one, though, was prevented from selling it. This move was deeply sus, if you ask pretty much anyone who is not Robinhood. Investors were furious and demanded an explanation.
For their part, Robinhood said they’d gotten a call from their clearinghouse. OK, yes, but other people were suspicious for a couple of reasons, one being the fact that a hedge fund called Melvin Capital, which lost billions in the GameStop frenzy, got an investment/bailout from… Citadel hedge fund, the totally unrelated hedge fund owned by the same people who own Citadel Securities, which is the Payment for Order Flow company that handles Robinhood’s orders.
The Push for Closure
A definitive answer about the buy button disappearance is one thing J Brown called for on our panel. If things like this are allowed to happen with no transparency or accountability, it’ll always be impossible for regular individuals to be on an equal footing with financial firms.
If you want to learn more about how to push for reforms, we’ve got you covered.