How did a Subreddit Community Influence the US Stock Market?

What is r/wallstreetbets r/wallstreetbets is a subreddit community which shook everyone from the wall street traders to people in the white house. They democratized the stock market and beat big wall street hedge funds at their own game. This subreddit community is a space where small investors, mostly college students, try to give competition to big wall street banks and hedge funds and help small and under performing companies by driving up their stock prices by buying the stock in bulk. The GameStop stocks The stock that was in focus here was the GameStop stock or GME. GameStop is a video game retailer which sells stuff related to gaming like consoles and games. During the pandemic most of the consumers shifted to online platforms like Amazon which ended up very badly for this retail store chain. They lost a humongous amount of revenue due to this forcing them to close many retail stores and driving the stock price down from 17.25 to 4 dollars, a week before it ‘went to the moon’ which is now the redittors like to describe it. Now, when hedge funds see such a situation, they try to play a little trick called shorting the stock. What exactly does shorting mean? Let us explain what exactly does shorting the stocks means with a made-up scenario. Assume that a person 'X' is the CEO of Stratton Oakmont, a hedge fund, X knows that the GME stock is going to decrease in value, so X asks his clients to buy a thousand GME stocks which right now is valued at 540 dollars each and X borrows it from them for a week. X sells all the stock and keeps the amount X gets in my bank account so now X has 540,000 in his bank account. Now X waits for the stock price to reach rock bottom, which, in this case is 4 dollars. X buys back all the stock for 4000 dollars and X has 536,00 dollars still left in his bank account. The client does not really have a problem because stock prices usually go up and if they do not, X will give him/her a part of his profit. The real life scenario This is what Melvin Capital tried to do with GameStop stock but before they dump such a huge number of shares, they must give out a public notice regarding the same. The reddit community noticed this and urged the members of the community to buy this share in bulk which caused the share to soar and Melvin capital had to buy the stock for almost ten times the price they paid for causing massive losses to the hedge fund. 'Robinhood' of the trading world Another name that has been coming up a lot lately with this is Robinhood. Robinhood is a trading platform that charges zero commission on trading. It is used by small traders like the people on r/wallstreetbets. It is based after the fictional character robin hood who stole from the rich and gave to the poor, but it did quite the opposite in the past few days. When the GME stock was soaring Robinhood temporarily stopped the trading of the GME stock. This resulted in the price of the stock to decrease and was seen as a unethical move as the platform was favoring big hedge funds and helping them to stop losses. What's the Conclusion? It is fascinating, how a group of college students brought hedge funds down on their knees and beat them at their own game.

A person who invested a month’s salary into GME can now pay of his home loan. I guess Harshad Mehta was right when he said ‘stock market ek aisa kuan hai jo poore desh ki paise ki pyaas bujha sakta hai’ but unfortunately Indian market regulators will not ever let that happen and I think its for the best because there are still people like Harshad Mehta ready for another 1992.