The Impact of Reddit Posts on Stock Market Prices

Reddit is an internet forum that has amassed millions of users over the years as it allows people to have discussions on whatever topic they wish. A sub-forum known as a subreddit is made available to accommodate people of similar interests, habits, skills, hobbies, likes, and even dislikes. For instance, if you have a love for online casino gambling and the Trueblue casino login is an everyday routine for you, you're just a subreddit away from finding people who love it as much as you do. Other examples include:

· r/Forex
· r/WritingHub
· r/music
· r/lifestyle
· r/roadcam

A Reddit forum is not limited to people within a certain jurisdiction but it stretches out globally. It provides a platform for a wide discourse or engagements in diverse areas that could be entertaining, academic, or simply leisure.

Recently, there’s been a debate about how this forum had begun to influence prices in the stock market. The exponential increase in its subreddit users of the famous WallStreetBets or r/WSB for short (with over 5 million users) gave the forum a rather powerful premise to take on some hedge funders and investors. In this article, the question as to whether posts made on the Reddit forum can or cannot influence stock market prices would be answered.

Case Studies of Reddit Influencing the Stock Market

1. GameStop Corp.

The video game retailer, although known for its brick and mortar age dealings, is the most shorted stock relative to its float in the market. A stock’s float simply refers to its number of shares that can be traded freely on the market without ownership to any insider in the company or institutional investors. Although the company reported a 30% rollover drop in revenue in the last quarter of 2020, there has been an increase in their stock for over 1000% recently as a result of the actions of the r/WallStreetBet community in the past few weeks.

2. BlackBerry

Blackberry used to be a top-notch leader in mobile technology but now, resurfacing in the areas of Mobile Security Software and Services Company, have decided to make a partner out of Amazon.com to develop IVY, an intelligent vehicle data platform that would be able to read and interpret vehicle sensor data. Although, this step taken has corroborated their efforts and has driven their revenue in the last year (2020) up by 15%, yet a net loss of about $152 million was reported by the company even as they continued in the struggle. Nonetheless, thanks to r/WSB as the company’s stock has gone up by 120% in the past months.

3. AMC Entertainment Holdings

AMC Entertainment Holdings own and operate about 1,000 movie theaters situated in the U.S. and Europe. With the whole pandemic of last year, social distancing became the norm in the world and it affected their business. The WallStreetBet community took the responsibility of saving the company as they created the hashtag, #saveAMC, and made it a trend on TikTok, Twitter, and other social media networks. In the third quarter of 2020, there was a huge fall of 90.2% in the company's revenue and they reported a net loss of about $905.8 million. Thanks to the r/WSB, the company's share price has gone up by about 300% in the past months, thus, leading its CEO to state that bankruptcy would be “completely off” in the next term.

4. EXPRESS

This is the type of heavily shorted, small-cap stock WallStreetBet is usually interested in. They are a struggling mall retailer and there was a fall in their revenue, up to about 34% in the last quarter of 2020 which caused them to report a net loss of about $90.3 million. However, there has been a squeeze on short sellers as a result of the intervention of the WallStreetBet which resulted in a 400% increase in stocks in the past months. Also, in the past weeks, there has been a sudden rush on record trading volume even as 15% of Express’ floats was held short. Although there haven’t been any recent changes made to the company’s Operandi modus in 2021, the r/WSB has resuscitated the company’s stock for the time being.

5. Plug Power

This is a Hydrogen-fuel cell maker and their shares became an instant hit during the electric-vehicle stock buying in 2020. This has continued in 2021 as their shares have maintained a continuous drive up, thanks in part to the r/WSB. In the past year, PLUG’s shares are up about 1,500% and now in the past month, only 90%. Although not still very much profitable, they reported a 79.9% revenue growth in the third quarter. After the stock’s rapid increase, shares are now traded at about 67 times sales suggesting a very long-term growth ahead.

How it Works

The WallStreetBet community on Reddit is one where everyday traders discuss their big successes or weakening losses. No one goes by their real name as they can identify with an online handle like any other online discussion board. This subreddit is strictly for matters on stocks and nothing short of it. It is majorly to brag about actual or real trades made and not the ones anyone wished they had made.

They make use of the ‘Robinhood’, MooMoo, and TradeStation trading app to make targets of stocks soar and hedge funds to take down. The users believe that hedge fund managers are living in the past and like one of the commenters on the subreddit stated, "they continue to look down on retail investors."

The sudden surge in stocks of companies by the actions of the r/WSB is a result of their keen interests in the potential capacity and not the failures of the companies. Like an unexpected casino bonus for australian online slot machines, the r/WSB have decided to gift such interference to companies that the rest of Wall Street have left for dead. They make use of information released by a group of short-sellers who anticipate companies’ failure in an attempt to quickly borrow and at the same time sell stocks to gain off from this assumption to invest in such companies.

They do all they possibly can to buy these stocks, just to hold them off from the short-sellers, which leads to a catastrophic financial impact on hedge funds as well as a group of investors who take on high-risk strategies by pooling all their money to make gains. This eventually leads to an increase in demand for stocks than the available supply of them, hence, the substantial increase in their prices and value.

From the facts and figures above, it is clear that with the right forum and tools, certain impacts can be made just like that of the r/WSB Reddit Forum on stock market prices.