Reddit Flexes Bizarre Market Influence
Source: Pixabay.com
For a company whose primary purpose is incredibly straightforward, Reddit has never failed to surprise us. Sometimes it’s a negative surprise that simply occurs on the platform; Slate recalls, for instance, the bizarre experience when the Reddit community mobilized to “solve” the Boston Bombing, turning up some fascinating real-time information but also — disastrously — labeling an innocent person as a subject. Sometimes, Reddit’s unexpected news is more enjoyable and forward-looking — such as when the company recently acquired Dubsmash in a move we profiled right here. Then again, sometimes the news we get from “the front page of the internet” is just bizarre.
Such is the case with the latest headlines, which indicate that activity on the Reddit platform drastically altered the stock market performance for two major companies. According to a story at CNET, this was done via a fairly simple maneuver. Members of the WallStreetBets community on Reddit targeted the video game seller GameStop, and effectively coordinated a mass purchase of stock. This caused the stock price to tick up, which led to short sellers scrambling to buy stock and cover their losses — which in turn cased the price to tick up even more. In the end, GameStop was up 822% from its price on January 1st, in a matter of weeks. The same trick was pulled with Blackberry meanwhile — not with results quite so lucrative, but still in such a way that the once-valuable mobile company jumped to higher value than we’ve seen in some time.
To fully grasp just how strange this was, it’s important to consider where exactly these two companies are in the early days of 2021. We’ll begin with Blackberry, because it’s a company a lot of people likely haven’t thought of in years.
Blackberry was effectively an early pioneer in something approaching smartphone tech, but was disastrously outstripped by the likes of Samsung, Apple, and more. Once-sophisticated Blackberry devices now seem like partially analogue relics. That said, it’s a company to keep an eye on given that it’s far from defunct and faces a need to innovate — and may be structured to do so easily. Unlike most companies of its ilk, Blackberry is structured as a “Limited Company,” which is closely related to an LLC. ZenBusiness outlines that this type of company is valued in part for “customizable ownership options,” which make it easy to acquire new partners, conduct mergers, and so on. This is particularly relevant now, given a report by TechCrunch that Blackberry is actually working with Baidu to develop “autonomous, connected cars” in a partnership. That’s not to say there’s been an official change in ownership just yet. But Blackberry appears to have the flexibility and will to try something new.
GameStop is facing a different sort of crisis, but in some ways a simpler one. Basically it’s Blockbuster — a company selling physical versions of media that consumers are now getting digitally. GameStop does a little bit more than just sell video game discs, and is still a useful store in some respects. But it simply hasn’t evolved to fit the era of digital downloads and video game streaming. And unlike Blackberry, GameStop doesn’t appear to have a great deal of ability or inclination to adjust now. In the eyes of many investors, it appears to be headed for a slow demise (which is why there were enough investors shorting the stock for the Reddit scheme to work).
So really, we have an outdated mobile phone provider attempting a Hail Mary on autonomous driving, and a physical video game seller walking the path of Blockbuster. And a little bit of chatter on Reddit made both companies’ stock prices soar.
This certainly makes you think about the kind of influence a company could generate with more creative use of the Reddit platform.
