GameStop’s short squeeze changed the whole narrative of financial markets right from the start of early 2021. Normally, it is hard to gain credibility or power as a retail investor as most of the power lies within the institutional basis but in this case, it was a group of investors who united on Reddit that flouted barriers. It all started as a movement on r/WallStreetBets but eventually branched out into a more purposeful community called Superstonk. This subreddit has become a hub for investors waging a battle against institutional investors, complete with the nuanced discussions and video essays that accompany an in-depth understanding of the finances surrounding GME.
In this post, I will touch upon Superstonk’s development, interests and how it is still relevant to retail investors today.
What is Superstonk?
Superstonk is one of the subreddits that came about as a result of the historical squeeze of GameStop shares. People who subscribe to this subreddit are different from those who follow twits and crazy trade. Other subreddits such as r/Wallstreetbets participate in meme wars on a daily basis and give terrible yet funny advice but Superstonk is a different breed, loyal to their elbow grease, time and research.
Superstonk does not get its name from Wallstreetbets, meme generals or the overall culture of cheap daytrading. It refers to the stonk goes up sentiment and focuses on the long term and prefers thorough analysis before buying GameStop shares.
How It All Started: The GameStop Short Squeeze
GameStop made headlines in January of the year 2021. Many investors viewed GameStop stocks as being able to one day grow and so they made the very controversial move of buying more than what they actually owned. It was later revealed that this caused the stock price to go up and transfixed a lot of institutional investors with great pessimism into GameStop’s growth. GameStop garnered major attention from hedge funds as the stocks from the franchise were heavily shorted, largely due to its antiquated retail model.
The higher the stock price went, the more hedge funds were forced to buy back their shorts to try and limit their risk in what is referred to as a ‘short squeeze.’ The tide turned and the stock increased in value, costing multiple hedge funds valuable money. However, for those everyday investors who held on to their GameStop shares, their worth was now worth a lot more than before.
GameStop stocks became part of internet culture, but many members were skeptical about the fact that it might turn this way and so decided to create ‘Superstonk’ where they aimed to keep the focus on GameStop and the market itself. It was very clear to see that this caused a void and hence led to a desire for something new.
What Its About
Superstonk — as the name says it — is a rather fanatical community that is dedicated to taking market manipulative practices to task and showing as much disdain possible to the people who think organizations should have preference over individual retail investors owning stocks from the United States. There are three main pillars that the community stands upon:
Market Manipulation: The same has been discussed concerning the activities of hedge funds and institutional traders who employ tactics like dark pools or naked short selling to artificially push the prices of stocks.
Holding for Change: Powers is of the opinion that by holding onto GameStop shares, shorting tactics of the hedge funds can be countered as they carry the belief that markets can be changed by ‘buying and holding’ the shares.
Key Themes in Superstonk Discussions
1. Shorting is Profitable: The advocated belief of the Superstonk members is “buying and holding” GameStop shares until the last penny, while others add the ‘expectation’ that shorting continues. The stock’s price is based on the idea that if they don’t commit the stock long enough, it would trigger another short squeeze. The “diamond hands” mentality indeed evolved as a key for the community.
2. Ryan Cohen’s Strategy: Ryan Cohen is known as the co-founder of Chewy. After joining GameStop’s Board and being later appointed as the chairman of GameStop, Ryan Cohen of Superstonk is considered as the man needed to be in charge and transformed GameStop by making it a retail brick niche. Cohen’s effort to pivot GameStop has been frequently discussed by Superstonk members who have highly regarded this move as beneficial for the stockholders.
3. The Market Is Not Always An Open Book
The Superstonk community does not remain inactive only on the price of GameStop’s share and has got a knack for spotlighting important maladies of the stock market. Numerous concerns arise encompassing high-frequency trading as well as naked shorting and a plethora of other vague techniques commonly applied by hedge funds. Superstonk users demand a more stringent regulatory framework and appropriate changes that will insulate the retail investors from the vices of the market.
Obstacles In The Way Of Superstonk
Even though Superstonk has expanded its size and influence much, there are several challenges that it still faces:
Market Indifference: There are many critics, who are sanguine about GameSop focusing on it for so long, because they see investors as engaging in a gamble who could end up with losses holding the stock since it could hit rock bottom.
Structural Competition: Retail investors, despite being able to combine forces to formulate a strong defense, are faced with fierce competition from institutional investors who are better armed with analytical resources, capital as well as information.
Nonetheless, for Superstonk members the movement is about more than evolution of stock price. It’s about making a difference and fighting against the greed and corruption of the market which is designed to keep the small trader down and out.
Conclusion
Superstonk presents a rather interesting niche within the financial ecosystem, which is that of retail investors ganging up against institutional traders and market abuse. Although the subreddit began with the theme of the continuation of the GameStop short squeeze movement, which triggered significant price action primarily for the benefit of the hedge fund shorts, it has gradually matured into a group that appreciates research within the markets and possesses an interest in the cause of the investors’ rights advocacy.
