[ I N D E P T H | G A M E S T O P ]
:
Following the explosive events surrounding GameStop in January , Annabel Smith unpacks the role of social media in this cautionary tale and its impact on institutional investors .
The Reddit revolution in the US has drawn attention to the potential power that a growing force of retail investors can wield in stock markets when equipped by social media .
Amateur investors have increasingly engaged with retail platforms in the last year , partly due to the pandemic leaving them idol at home , but also due to the newfound onslaught of information through social media and access to the market through retail brokerages and platforms such as Robinhood .
Set up in 2013 the mobile trading app , now valued at $ 21 billion and proclaimed to be democratising finance , offers investors access to the financial markets with zero commissions .
“ For the largest online brokers , the number of daily trades has tripled since 2019 ,” John Marshall , head of derivatives research at Goldman Sachs , commented on a retail investment podcast from the US bank . “ But this has mainly been driven by a small portion of their customer base . These day traders are less than 10 % of their customers , but they represent more than half of their trades .”
Meme-stocks The events that took place involved stocks such as GameStop and AMC Entertainment in what is considered one of the first social media driven and coordinated buying regimes by retail investors . It resulted in market conditions likened to the dot com bubble around the turn of the century , leading to concerns that institutional investors must now adapt their risk models to mitigate the possibility of this happening again .
To put the gravity of the situation into perspective , on 27 January at the height of the GameStop saga , 24 billion shares were traded on US exchanges , surpassing the previously set record by 4 billion shares traded in the 2008 global financial crisis .
“ Until now , retail trading activity has never been
Issue 67 // thetradenews . com // 51