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Jan 28, 2021

Millions of retail investors convening in Reddit groups and targeting short-sellers

Examples of GameStop, AMC Entertainment and BlackBerry show how collective action moves markets

As savvy Reddit users continue to drive up the price of companies like GameStop, AMC Entertainment and BlackBerry and squeeze out short-sellers, calls for regulatory oversight mount. 

GameStop’s share price has increased by around 1,745 percent since the beginning of this year, while AMC Entertainment’s stock grew 301 percent yesterday (January 27) alone. As Alex Kirshner writes for Slate, members of an investing sub-Reddit called r/WallStreetBets identified that there was significant short interest in GameStop, AMC Entertainment and BlackBerry and recognized the opportunity to make money while inflicting pain on short-sellers by driving the price up through options trading. 

Four months ago, Reddit user u/Player896 published a post titled ‘Bankrupting institutional investors for dummies, ft [sic] GameStop’, which outlined the short interest in GameStop, and ‘why buying GameStop may not be as bad as you think’. The post – which reads like an analyst note written by Fight Club protagonist Tyler Durden – has received 688 upvotes and 346 comments. It was posted to WallStreetBets, which currently has 3.4 mn members. 

Since then, the video game firm’s share price has ‘rocketed to the moon’– Redditors’ catchphrase for dramatic increases – and both Melvin Capital Management and Citron Research have walked away from GameStop (or GameStonk, according to Elon Musk) after taking a large hit on their short positions. 

GameStop and AMC Entertainment did not respond to requests for comment. 

Market manipulation and calls for regulation 

Speaking during different segments on CNBC’s Squawk Box yesterday, Nasdaq CEO Adena Friedman and Gregrory Branch, managing partner at Veritas Financial, expressed concern about market manipulation. Friedman called on US regulators to examine the situation.   

US Senator Elizabeth Warren agrees with Friedman, tweeting that ‘it’s long past due for the SEC and other financial regulators to wake up and do their jobs.’ But Warren and Representative Alexandria Ocasio-Cortez expressed little sympathy for the squeezed short-sellers, with Ocasio-Cortez tweeting that they ‘have a long history of treating our economy like a casino’.  

Allison Herren Lee, acting SEC chair, released a short statement on Wednesday afternoon addressing the situation. ‘We are aware of and actively monitoring the on-going market volatility in the options and equities markets and, consistent with our mission to protect investors and maintain fair, orderly and efficient markets, we are working with our fellow regulators to assess the situation and review the activities of regulated entities, financial intermediaries and other market participants,’ she said. For a short period afterwards, the moderators of WallStreetBets changed the privacy settings of the group to restrict access to non-members. 

Former SEC commissioner Robert Jackson – who left the commission in February 2020 – has previously warned that some retail investors interact with the capital markets like a game

‘Situations like GameStop and AMC take away our ability to thoughtfully address questions regarding valuation because there are no more rules,’ Devin Sullivan, senior vice president at The Equity Group, tells IR Magazine. ‘Exuberance morphs into manipulation, and that draws into question the integrity of the markets. When stories like this lead the local news I think change is coming. We are already such a highly regulated industry but I suspect this type of activity will invite more oversight.’

How popular are Reddit investing groups?

Millions of Reddit users have joined groups dedicated to investing. Membership has swollen since the Covid-19 outbreak, as many individuals received government stimulus checks and spent all of their time at home. In August 2020 one of the moderators of r/Investing told IR Magazine that the group received 2 mn visitors per month. Moderators are volunteer members of the sub-Reddits, not paid Reddit employees. 

Membership of selected investing sub-Reddits (as of January 27)


3.4 mn


1.3 mn


1.3 mn











To this day, most IR professionals spend significantly less time on retail IR than on maintaining relationships with institutional investors. Individual investors do not move share prices, but the GameStop example shows the potential for large quantities of individual investors acting in tandem. 

Last year the IR community saw the impact Redditors could have when the SEC unveiled its proposed changes to 13F filings. As IR Magazine reported in August, Reddit users were responsible for hundreds of the comment letters the SEC received in opposition to the proposed rule change. 

While some of these Redditors fit the description of 20-year-olds playing with their stimulus checks, IR Magazine also found commenters who work as financial advisers, and who have spent time on equity sales desks and in securities law – all of whom post and interact under the anonymity of aliases. 

The moderator for r/Investing – who asked not to be named – told IR Magazine in August that many Redditors are drawn to the site as a reaction against traditional sources of information. ‘Reddit likes to think of itself as an alternative source of information, but it ends up becoming a primary source of information,’ the moderator said. ‘[Redditors] think the news is curated, biased and bought, that the information on TV is paid for and not interesting. Reddit is based on simply what is interesting.’ 

In r/Investing, there have been instances where financial advisers have revealed their identities in order to raise concerns about behavior that could cause financial harm to members of the group. The group has shunned those members through downvotes and hostile comments, the moderator said: the members ‘would rather have anonymous advice than expert advice.’ 

By some, this is perceived as a democratization of access to the markets and information. By others, it’s seen as nihilism. Kimberly Esterkin, managing director at ADDO Investor Relations, tells IR Magazine: ‘There is a prevailing belief among some retail traders, particularly on platforms like Reddit, Stocktwits and Yahoo Finance, that trading should be for all people, not just the hedge fund managers, mutual funds or index funds. Loud and clear comes the mantra: trade one, trade all!’

Dr Richard Smith, chairman and executive director of the Foundation for the Study of Cycles, believes the GameStop incident reflects ‘the populist us against them theme that seems to be driving a lot of the conversation on WallStreetBets. There’s a sense of disenfranchisement and mistrust in our institutions societally right now.’ 

What should IR teams do? 

At most companies, retail investor relations entails responding to inbound inquiries and updating materials on the IR website. But as custodians of the company equity story, should IR teams be monitoring, engaging and contributing to forums like Reddit? 

Last summer IR Magazine spoke to several representatives from cannabis companies who had experimented with Reddit. Some companies have their press releases posted into sub-Reddits, while one IR professional went as far as exploring hosting an Ask Me Anything – a live Q&A on Reddit. The individual, who asked not to be named, pulled out after being brought to tears by one of the moderators. There’s also a concern about being able to control the narrative and the environment: a Q&A on Reddit is very different from the fireside chats at banking conferences that most IR teams are used to. 

But Esterkin says this is an issue that IR teams should be grappling with following that massive influx of new investors into the market during the last 18 months. ‘As a result of the surge in retail investing, stocks – particularly small and micro-cap names, which are less liquid and more susceptible to shifts in price – are becoming very volatile,’ she says. ‘We see micro-caps, for example, double in price in a single trade.’

Investment theses about public companies are posted on Reddit every day, often attracting hundreds of interactions. Some companies that have experienced significant volatility based on Reddit activity include Kodak, Nikola, Allena Pharmaceuticals, Ideanomics and Huttig Building Products. 

There are efforts within the IR community to build stronger relationships between issuers and retail investors. Stockperks and TiiCKER are both striving to incentivize retail investor engagement through perks, while Nasdaq published an educational hub for retail investors last year. 

But it remains to be seen how IR teams can build bridges with investors who have a fundamentally different view of the world: one that rejects traditional sources of information. Whether they’re Wolves of Wall Street or Occupy Wall Streeters, Redditors can move markets and pose a new challenge to IR teams.

Ben Ashwell

Ben Ashwell was the editor at IR Magazine and Corporate Secretary , covering investor relations, governance, risk and compliance. Prior to this, he was the founder and editor of Executive Talent , the global quarterly magazine from the Association of...