Netflix series on GameStop tells how wolves of Wall Street can bleed

If you’re one of the majority who despise the stock market, you probably didn’t pay attention to the news in January 2021 about the uproar caused in the United States by the soaring stock of a video game store on the verge of bankruptcy.

Don’t feel guilty if only the name GameStop stuck in your memory and everything else sounded like another financial news bore. Perhaps it wasn’t clear that this was, in fact, a story of revenge by ordinary people against billionaires who dictate the rules of the game in capitalism and, like it or not, cause a lot of suffering.

Newly released by Netflix, the documentary miniseries “GameStop vs. Wall Street” tells in three chapters how amateur investors put in place a risky plan to wreak havoc on the stock market and how some made a lot of money from it.

Before explaining the chess game that resulted in the unlikely GameStop case, the documentary directed by Theo Love gives voice to small investors to explain the feeling that led them to hunt wolves on Wall Street, as the financial district and address of the New York Stock Exchange.

Among them is Diana Wilson, who saw her father lose his job and home in the 2008 mortgage crisis.

“I have this photograph in my memory: while people and the press were out there on Wall Street, those motherfuckers were on the porch popping champagne, laughing and taking pictures of the people who lost their homes in the crisis,” says Wilson, in one of the excerpts of your interview.

The scene narrated by Wilson took place in 2011, during protests against financial market profits in the face of growing inequality. The movement, known as Occupy Wall Street, was not exactly a response to the 2008 crisis and the people on the porch were just customers at a nearby restaurant.

None of that matters. The image follows on YouTube as a portrait of the rich mocking workers who depend on their next paycheck to keep from being evicted from their tiny apartments.

“When we look at financial crises, who are the big losers?” asks Vicki Bogan, an economics professor at Cornell University, in another part of the documentary. “Think of the 2008 mortgage crisis. [Os perdedores] they owned the property,” he says. “Banks may have losses for a while, but then they recover. Then came the pandemic and people lost again.”

And if there are symbols of the wiles of the owners of money to profit in any situation, even in a crisis that took the work and home of millions, hedge funds (hedge funds) are certainly among them.

In this type of business, managers are free to make very diversified and risky applications. It is a way of offsetting losses in times of economic turmoil. One of the strategies of these funds is short selling or short selling.

In a short sale, the manager rents a stock that he believes will lose value and sells it immediately to buy it back at a lower price and return it to the owner when the loan term expires. It is said, in market jargon, that this manager “is short” on a particular stock.

Jason Mudrick, founder of hedge fund Mudrick Capital, didactically illustrate in the film how profitable the operation can be. “I rent your IBM stock for $10 and sell it [pelo mesmo preço]. Next month, it’s worth $8. I buy that IBM stock and give it back to you. For you it’s all the same. You have your IBM share. But I only spent $8”, he explains. In other words, he won $2.

Hedge funds arouse people’s rage simply because they bring profits to investors who bet on the downfall and eventually failure of a business. Some made millions of dollars in 2008, when 170,000 businesses failed in the United States and 2.3 million families lost their homes.

Faced with the growing supply of online games, GameStop was a typical doomed to bankruptcy and several funds held short positions in the company’s shares, whose business was the purchase and resale of used games.

In the cruel mechanism of short selling, the news that a large fund is short in shares of a certain company tends to further devalue the target of the operation. It is a self-fulfilling prophecy.

This story seemed to be repeating itself with GameStop, until, in the last week of January 2021, thousands of small investors launched their revenge against Wall Street and started buying the store’s stock in droves and this sent prices soaring. .

Hedge funds that bet against GameStop started to make a loss, after all, they started having to pay higher amounts to return the borrowed shares. These funds then tried to cut their losses by quickly buying these stocks before they got even more expensive. This made prices go up even more. GameStop’s value skyrocketed by about 700% in one week.

The acceleration of stock prices far above market fundamentals in a small range is called a short squeeze, literally, a short squeeze. It’s the nightmare of short-trading funds.

“It’s like picking up coins on a train track: it works until you get run over,” Mudrick said, in one of the many catchphrases managers recite in the documentary.

But how is it possible that ordinary people have seen a loophole to punish the market in a battle repeatedly described by the press as David versus Goliath? Well, in this re-edition of the biblical duel, cell phones, apps and social networks were fundamental.

Retail investors are at a major disadvantage compared to institutional investors, who have advisory services equipped with technology capable of monitoring financial transactions around the world in real time.

This impotence in the face of the system acted as a catalyst for members to a forum for amateur investors called WallStreetBets on the social network Reddit, where users are anonymous and communicate primarily through memes. A perfect environment to sow chaos.

Participants gain notoriety on WallStreetBets for risky bets on the stock market that almost always pay a loss.

Amid the anarchy of this community, a few members did the math and discovered that a strong GameStop shopping movement could impose a short squeeze. The theory was posted online and things caught fire once and for all when successful entrepreneurs decided to buy or at least mention the movement. There was billionaire Elon Musk to add fuel to the fire.

Musk tweeted to his more than 40 million followers: “Gamestonk!!”. A pun that combines the name of a company, in this case GameStop, with a variation of the word stock. The richest man in the world warned millions that GameStop was booming.

These small investors wouldn’t have a chance to boost stock prices quickly, however, without the right tool. The technology needed to do this had come a few years earlier, with the creation of the Robinhood brokerage app.

Free and user-friendly to the point of making buying and selling shares as simple as calling an Uber or posting a photo on Instagram, Robinhood has its purpose in its name and was conceived in the wake of the 2008 crisis, as they also tell in the documentary. Vlad Tenev and Baiju Bhatt, founders of the company.

Reddit users armed with Robinhood had the tools and willingness to, as a group, go all-in at GameStop and thus make Wall Street bleed. Hedge funds lost billions.

Of course, anyone who hasn’t spent the last two years on Mars knows that these investors haven’t beaten capitalism.

The brake on the speculative movement occurred when Robinhood decided to disable the buy button, but kept the sell button on shares. This forced the application of the law of supply and demand. If no one can buy but everyone can sell, the price drops.

There are many suspicions about what was behind Robinhood’s decision, but regulators accepted the explanation that the speculation put users at risk because it was impossible for the company to carry out in the very short term the financial operation necessary to maintain payments to investors. It’s even a little hard to swallow.

“GameStop vs. Wall Street” is not a boring documentary about finance, but a story of human beings involved in a rare counter-coup to the system. Ordinary people in an epic battle against the wealthy who have tasted, at least for a short time, their own venom.