[Global Times reporter Lin Ri Shao Yijia] In the past few days, US retail investors have become the target of global stockholders' "worship"-they organized retail joint actions through social platforms to sell stocks worth US$3 to US$400, slamming Wall Street elites. Leading professional investment institutions have caused blood loss and even bankruptcy of many major funds.
On the 28th, the main force of Wall Street organized a wave of "retaliation", using simple and rude methods-blocking retail forums and prohibiting buying stocks that retail investors concentrated on.
The day's showdown ended with a plunge in retail stocks.
However, the Wall Street elites had not had time to celebrate "returning the game." On the 29th, retail stocks reopened the skyrocketing mode after the market opened.
The issue of the regulatory boundary of the securities market is causing heated discussions in the United States. At the same time, some analysts believe that this is a manifestation of American intergenerational conflict and populist sentiment in the stock market.
CNBC website quoted financial observer Novo Gratz as saying: "The intergenerational conflict in the United States has spread to the stock market. I spent an hour on the Reddit forum last night and saw an emotion that I saw during the Congressional riots. , I have seen it in the protests of “Black people’s fate is also fate”. This is the millennials and Gen Z baby boomers shouting, “You’ve messed up our planet, ruined our economy, ruined us.” In the future, everything is messed up'."
Retail investors hold groups, institutions tremble
The story originated from a stock called Game Station (GME).
This is a 37-year-old game retailer. As the BBC described it on the 28th, "In the age of network connection, the game station still specializes in selling physical video games, which makes it almost an antique."
This company has lost money for three consecutive years, and its stock price fell to $3 last year.
Later, due to the epidemic situation and the rise of the home economy, game companies were popular in the market. This "antique" game company also turned upside down, and its stock price rose to $40 at the beginning of this year.
At this time, a professional organization came forward and said that the game station "stock price is inflated."
On January 19, the world-renowned short-selling fund Citron made a statement: The share price of Game Station should fall to $20 to be reasonable.
Suddenly, a number of major funds began to dance, and one after another started shorting game stations.
However, the Wall Street elites who are accustomed to calling the wind and calling the rain never expected that their actions angered young retail investors in the United States-"Game Station is our childhood". On the Reddit forum where American retail investors gather, there are millions. The retail investors voluntarily defended the share price of Game Station. They called on investors to continue to buy this stock and work together to defeat institutional shorts.
According to the “Wall Street Journal” report on the 29th, many of these investors are novices. They huddled together on social networking sites such as Reddit, Discord, Facebook, and Twitter to encourage each other to buy stocks and show off their victory.
As a result, the stock, which was considered by the agency to be "just US$20," had its share price soared to US$380 on January 27, and the company's market value once reached US$26.5 billion, surpassing Delta Air Lines.
By the close of the market on January 27, many short-selling game stations, including Citron, were forced to raise the white flag to "surrender" and left the market sadly.
Hedge fund Melvin went bankrupt.
According to data from the financial analysis company S3 Partners, on January 26 alone, the loss of a short position was as high as $5 billion on a stock in Game Station alone.
In addition to game stations, recently driven by American retail investors, several stocks that are considered incurable by the main force, such as AMC cinema, clothing brand Express, and BlackBerry, have all gone out of a shocking wave of rising prices, and they have also subverted The traditional order between hedge funds and retail investors.
Dalmatia, a 44-year-old American stock investor, said that he used to think that stock trading should be the work of professionals sitting in skyscrapers in big cities, but he also started trading stocks during the stock market crash last year, and he recently made money. The stock includes the troubled movie theater line AMC.
Williams, a 36-year-old Atlanta resident, said that in the past two weeks, he made nearly $150,000 through options positions in Game Station, enough to repay his remaining student loan of more than $43,500.
"Retail investors are holding groups and institutions are trembling," the Wall Street Journal commented on the 29th. "The dominant force on Wall Street is shifting. Retail investors have won at least temporarily and are enjoying victory."
Wall Street's main force brutally counterattack
On January 28th, local time, Wall Street had a sudden change.
Many brokerage platforms such as Robinhood, a zero-commission online brokerage firm known as the "retail home base", have begun to restrict the trading of recent soaring stocks such as Game Station, AMC Cinemas and Nokia (NOK).
The brokers issued a statement stating that these stocks "can only be sold, repurchased, and cannot be bought."
Robinhood said that temporarily restricting the trading of stocks such as Game Station is to "cooperate with the Securities and Exchange Commission's regulations," but it did not explain which specific regulations and why cooperation is needed at this time.
Sure enough, as soon as the market opened on the 28th, Game Station's stock price plummeted by 24%, and then violently pulled up. During this period, it triggered multiple circuit breakers, once rising to a record high of US$483, and then quickly dived, and then repeatedly broken down.
As of the close, Game Station has fallen 44%, AMC and Express closed down more than 50%, and BlackBerry closed down more than 40%.
While these stocks plummeted, the three major U.S. stock indexes collectively closed up on the 28th, and the Dow Jones index rose more than 300 points.
However, this wave of counterattacks by the main Wall Street forces attracted fierce criticism. A group of retail investors filed a class-action lawsuit against Robinhood on the same day, accusing it of depriving customers of the right to use its services and obtain potential benefits from transactions without legal reasons.
On the previous day, the server of WallStreetBets (Wall Street Casino), the most famous sub-forum on the American retail forum Reddit, was suddenly interrupted for more than ten minutes. The platform explained that the ban on the server has nothing to do with financial fraud, but because of the forum. "Continue to tolerate" hate speech, glorify violence, spread rumors, etc.
On the 29th, under various pressures, various online brokerage platforms more or less lifted trading restrictions on several stocks including Game Station.
As a result, the share price of Game Station soared 113% to 413.98 US dollars within a few minutes of the opening on the 29th. Trading was suspended when it hit the fuse point. AMC also rose 79% at the opening.
The epidemic has spawned millions of new investors in the U.S.
"So this is the new era of US stocks when retail investors are awakening?" asked the British "Financial Times" on the 28th.
This wave of retail investor frenzy has also shocked the political circles. The White House, the U.S. Congress, the U.S. Department of the Treasury, and the U.S. Securities and Exchange Commission all issued statements expressing their concerns.
Bennett, the former head of law enforcement at the US Financial Supervisory Authority, said the US Securities and Exchange Commission may be investigating trading activities and information on Reddit.
On the 28th, Democratic Rep. Cortez of New York State and Senator Cruz of the Republican Party of Texas criticized the securities dealers’ trading restrictions.
Cortez wrote in a tweet: "As a member of the House Financial Services Committee, I support holding hearings when necessary."
"The biggest news in the financial market this week is a tug-of-war game between Wall Street professionals in suits and shoes and Internet mobs." The New York Times commented that Wall Street was the last institution to be occupied by Internet populists. One, "Retail investors sell, Wall Street will no longer be before."
Li Xunlei, chief economist of Zhongtai Securities, said in an interview with the Global Times reporter on the 29th that the valuation level of stocks such as Game Station is indeed high. He believes that the behavior of American retail investors is unreasonable and is suspected of market manipulation. Insider trading should also be punished by securities regulatory authorities.
He said that there have been similar "short-selling" markets for poorly performing stocks in the Chinese stock market, and the Securities Regulatory Commission later intervened.
However, Hong Hao, managing director of BOCOM International, told the Global Times reporter on the 29th that he believes that the behaviors of American retail investors and Wall Street financial institutions are market behaviors. “If someone goes long, someone goes short. There is no right or wrong. ".
Retail investors challenge the main force. I am afraid that no one dares to think about this scenario two years back.
According to data from US financial institutions, as of mid-2018, the market value of stocks held by retail investors was less than 6% of the total market value of US stocks.
In 2020 alone, the number of newly created trading accounts in the US stock market will exceed 10 million.
Many young Americans who were living in their homes due to the epidemic started their careers as investors with cash checks issued by the government.
According to Bloomberg News, in early January this year, the retail trading volume of online brokerage apps such as Robinhood outside the exchange surpassed that of institutions such as the New York Stock Exchange and Nasdaq for the first time since 2008.