Reddit's Impact on the Stock Market: A Weekly Analysis

Paying attention to financial news always requires grasping a fast-moving and confusing vocabulary. Not only do you need top-notch monetary literacy, but you have to understand markets, history, politics, slang, and psychology. It can be intimidating for anyone, but sometimes a story comes along that makes everyone want to learn more.

On Wednesday, investors, journalists, and the peanut gallery watched as members of a single subreddit began buying and selling stocks of struggling brick-and-mortar companies like GameStop, AMC Cinemas, and Nokia. The activity was so brisk that prices exploded, allowing stockholders to earn huge returns while also endangering the bottom line of a particular hedge fund. The federal Securities and Exchange Commission, as well as brokerage firms like TD Ameritrade, have stepped in or are closely monitoring the situation, which briefly caused some panic on Wall Street.

One Twitter user, ​@jaredhoy​, explained the mechanics of the gambit in a viral tweet. "A 'short' is when you borrow a stock from a broker and sell it immediately at its current price," he wrote. "Then you hope the stock's price falls such that you can buy the stock back at a lower price and return the shares you borrowed to your broker, but keeping the difference."

Supporters of the movement have little sympathy for aggrieved financiers, including the trading platform Robinhood, which Michigan Rep. Rashida Tlaib accused of market manipulation by halting these trades. "All of Wall Street saying that the public joining together in this fashion should be illegal," ​@jaredhoy​ wrote, "but really they just lost at their own game to the masses."