The reign of Reddit users continues as their influence proves to be more than a single day event. On Jan. 27 of this year, both AMC and GameStop stocks hit their 52-week high featuring unprecedented growth rates. This surge was in large the doing of Reddit users on popular investing forums such as “WallStreetBets”. On these subreddits, users spoke about gathering to buy numerous shares of relatively stagnant stocks such as AMC and GameStop. The global pandemic is one of the many aspects that has affected the wellbeing of these companies, as it has for others. So much so that AMC was once rumored to be filing for bankruptcy. In the case of GameStop, the digitization of video games and an increase in online shopping amongst other facets have also reduced the popularity of the company over time.
With this, the news of massive short selling by wealthy investors, otherwise known as betting against the growth of an asset, was brought to the attention of Reddit and Twitter users. To prove strength in numbers, Redditors simultaneously inflated the price of these stocks, causing tremendous losses for short-sellers. To put this into perspective, GameStop shares were averaging about $20 to $30 the week prior and jet up to the mid 300’s during this time. As the saying goes, all good things must come to an end, and both AMC and GameStop faced large downfalls. The initial excitement began to wear off and trading was momentarily restricted on the popular trading app, Robinhood. As it currently stands, AMC which hit its highest point at $20.36 per share, is now trading at an average value of $5 to $6.
Once the dust began to settle and markets re-stabilized, Redditors turned their attention to a new investment: Cannabis. As the legalization of recreational marijuana use at a federal level becomes more of a reality, the overall health of the cannabis sector is expected to simultaneously rise. In recent news, Senate has been aiming for new legislation that would greatly benefit a variety of medical marijuana companies. The growth of stocks in this sector, such as Tilray and Aphria, has been naturally occurring and fluctuating with ease.
Once Reddit investors increased their involvement, the price of shares in these companies immediately inflated at unexpected rates. On Wednesday of this week, the pharmaceutical cannabis company, Tilray, witnessed soaring growth rates and peaked around 142.31% right before closing. Similarly, other companies in this sector such as Sundial Growers Inc. and Aphria also witnessed huge gains and 52-week highs. While this growth proved to be a hefty gain for short-term investors, long-term shareholders must face the restabilizing process as the health of the cannabis sector takes a punch.
The past month has proven to be an entirely unexpected and highly volatile time for the stock market. The influence of social media, particularly Reddit and Twitter, has indicated clear dominance when the masses join together. The weeks to come bring anxiety and questions as to who will face the wrath of Reddit next.