Aaaaaaaaaaargh! Robin the Hood While the Redditors Flee

GameStop wasn't just a frenzy in the markets, but also in the media.

Three years ago, I wrote an article about the possible ramification of the banning of Alex Jones from social media. Today we have the answer. Anyone and everyone can be banned for anything. This week, seemingly everything got swept up into the vortex of GameStop and what emerged was a bloated hydra monster, each head representing different sorts of ‘constituencies’ or ‘audiences’ from the battered hedge funds, the servile corporate press, the trading platforms like Robinhood, and even a resurrected cancel culture in a new fancy dress.

This week saw the online version of the storming of the castle, with Redditors on the offensive and the financiers, hedge funds and the markets on the other. What earlier this week many Redditors began calling a war became a battle cry to take to the digital barricades. Friday was going to be the big day when lots of short contracts became due and the hedge funds Citron and Melvin were to implode under the short squeeze. ‘Hold’ was the meme and Mel Gibson had another day in the limelight as William Wallace from Braveheart. But scaling the walls wasn’t so easy. It actually became harder on Thursday as the hedge funds, trading platforms and the SEC locked arms in suppressing the rising rabble and narrowly avoided the pitchfork and guillotine party. But then again, Wall Street was always going to be fine.

In the old truism, the house always wins, and on Thursday all major trading platforms with Robinhood taking the lead, turned off the taps to the hot stocks that Redditors were using to squeeze the shorts. Nobody was able to buy, only sell stocks like GME, NOK, BB, etc. As it turns out, Robinhood’s major investor is Citadel LLC, the parent company of Melvin Capital, one of the major hedge funds the Redditors were targeting. By colluding with its parent company, Robinhood made trading impossible. Citadel had of course moved to deny it had anything to do with Robinhood’s decision. The trading platform caught the ire of millions, including several politicians, as a mass exodus of active accounts was already underway. Then at the end of the day, Robinhood released its hold on the trades, making them possible again in after-hours trading. By then it was too late for many Redditors because after-hours trading is restricted to accounts with special privileges or large amounts of invested cash. Robinhood’s move and the mass exodus caused GameStop and AMC stocks from rising further and gave hedge funds the opportunity to pivot and cover their positions. The same day the Reddit group r/WallStreetBets was temporarily banned for ‘hate speech’ apparently for its flagrant use of offensive language. The group’s members use call each other ‘affectionate’ and ‘funny’ names such as retard, degenerate, autist, ape – you get the idea. Almost immediately the crypto Dogecoin took off, as millions of Redditors piled in since they were unable to trade stocks. Doge became a trending meme for the night as it steadily climbed in price and gained over 800% in a few hours.

As WallStreetBets emerged from the dank basement of the internet into the gleaming sun of Twitterverse, it jumped in membership from roughly 2.5 million users to 6.5 million in the span of two days. Redditors from around the world began asking questions where to put their money and life savings to help with the nascent class war. Schadenfreude abounded as the hashtag #EatTheRich started trending on Twitter Thursday night. What started as an all out war devolved into trench warfare rather quickly as both sides dug in, Redditors holding positions and the hedge funds leaning on their friends in high finance and Washington DC. Never has the corporate news been so full of puffed up weepy indignity by the fancy lads of the global financial elite. Harvard graduates in $10,000 Gucci suits sneering and frothing at the mouth at the audacity of the unwashed rubes that dared to challenge their authority and impeccable financial intelligence.

And then on Thursday evening the CEO of Robinhood Vlad Tenev gave a babbling incoherent interview trying to explain the moves that RH took to shut down retail trading of certain stocks and effectively strangle the baby in the crib. Interestingly he never mentioned his ties to Citadel. Friday morning Robinhood moved to allow trading of the hot stocks again, but traders were able to only buy one single stock of each security. This happened precisely at the moment it was revealed that Vlad Tenev and Robinhood received a $1 billion infusion of cash from investors and banks like JP Morgan and Goldman Sachs, banks famous for the 2008 sub-prime mortgage crisis and that Jannet Yellen was paid $810,000 in speaking fees by Citadel. Robinhood gets a cool billion dollars so that it could in Vlad Tenev’s vague language ‘protect the firm and protect our customers’ ($1,000,000,000 is what a billion looks like) while the Democrats continue to dangle the $1,400 stimulus carrot in front of its constituency, now deferred to March or even later. In the end, what was meant to be the great Friday denouement where the soldiers finally storm the walls and set fire to the castle, turned into a mess of a day of half-hearted sell-offs as the movement slowly petered out. Next week maybe?