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It has all the hallmarks of a Hollywood revenge thriller. A group of regular Joe day traders coordinates to upend the stock market through chats on Reddit and TikTok, boost the share price of companies struggling amid the pandemic and cause hedge funds to lose billions — largely through an investment site aptly named Robinhood.
That’s what happened in late January when some members of a Reddit forum called r/wallstreetbets noticed that hedge funds had taken short positions on GameStop, AMC Entertainment and other companies. In other words, the funds had borrowed shares of stock and then sold them, expecting the price per share to fall. The expectation was to buy back the shares at a cheaper price, return them to the lender and pocket the difference. But, here, in a maneuver known as a short squeeze, the individual traders bought in en masse and drove up the prices substantially. Since the hedge funds had borrowed the shares, they were forced to buy them back at the higher price and lost a ton of money in the process. Robinhood sparked backlash by temporarily halting retail (individual) purchases of the two stocks — a move to avoid handing more than $3 billion in collateral to its clearinghouse that also undoubtedly helped the hedge funds — prompting litigation from users and bipartisan calls for an investigation. (As of Feb. 2, GameStop and AMC Entertainment have since fallen from their Jan. 27 peaks to the tune of 81 percent, $483 to $90, and 62 percent, $20.63 to $7.82, respectively.)
That subject would seem ripe for writer-director Adam McKay, whose 2015 film The Big Short chronicled market manipulation in the lead-up to the 2007-08 financial crisis. “Wall Street has been pushing this ridiculous idea of a perfect free market for years to justify shredding basic regulations so they can rip off most Americans,” McKay tells The Hollywood Reporter. “So, it’s hard not to love what that Reddit group is doing to the hedge funders. You want a free market? You got it.”
Though McKay has no interest in delving into the drama himself, at least two projects centering on the ragtag band of investors are in the works. MGM acquired Ben Mezrich’s book proposal The Antisocial Network, while Netflix is mounting a competing film from writer Mark Boal with Noah Centineo attached to star.
Hollywood isn’t merely interested in day trading as a plotline, though. Since the COVID-19 crisis hit last year, many in the industry — particularly millennial actors — have turned to amateur investing to relieve boredom and feel productive amid work stoppages. “What’s happened, as evidenced by this pandemic, is anything you thought was real and solid, your foundation has been rocked. Anything that you thought was traditionally tried and true now is up for play, open for discussion,” says business manager John McIlwee, adding that an increasing number of entertainment clients are using Robinhood and Coinbase obsessively, looking to get in on the next Tesla. “I won’t let anyone play with their nest egg. We talk it over and come up with an appropriate amount. Then I let them have fun with it. It also helps ground people to their finances.”
Matthew Gilbert-Hamerling, another Hollywood business manager, has also seen an uptick in day trading — it’s gone from a couple of clients to dozens — and he warns against chasing the next short squeeze or dramatically changing one’s investment strategy. “There’s a bit of euphoria out there right now and some unrealistic expectations of how easy picking winners is,” he says. “I worry a lot of people are going to lose more than they can afford to lose as a result of this type of behavior.”
While Reddit’s r/wallstreetbets forum grabbed a lot of attention amid the fracas, Gilbert-Hamerling first saw the chatter on a corner of TikTok dedicated to financial and investment advice a few days before it made international news.
“The ‘StockTok’ or ‘FinTok’ community has exploded over the last year,” says Robert Ross, a senior equity analyst at an investment research firm whose @tikstocks account has about 265,000 followers. “That said, most of the people creating financial content on TikTok have no business doing so. I’d say 95 percent of the accounts have less than two years of investing experience, almost none of which in a professional setting.”
While TikTok is a great place for basic financial literacy tips, experts caution against believing anyone promoting get-rich-quick schemes.
“No one knows where a stock will go on any given day, and telling people to invest their hard-earned money into extremely speculative penny stocks is simply irresponsible,” says Austin Hankwitz, a strategic financial analyst for a health care company and TikToker with nearly half a million followers. Though he expects this won’t be the last time the social sites are ahead of the curve on something big. “It’ll happen again. The decentralization of investing ideas (despite them being bold ideas and extremely speculative) will only continue.”
While many of the casual traders share a disdain for Wall Street players like hedge funds and private equity firms and view their efforts as something of a populist counterweight, at least one major financial player leveraged the AMC surge and retail trader enthusiasm to make a nine-figure profit.
Private equity firm Silver Lake, which had poured hundreds of millions into AMC Entertainment via debt offerings, was able to convert a $600 million bond due in 2026 into AMC stock for $13.50 per share. The firm disclosed late on Jan. 29 that it had turned around and sold all those shares at the peak of AMC’s stock surge, selling them to eager buyers for as much as $24 each, netting the firm an instant $114 million gain, and reducing AMC’s debt load in the process.
It remains to be seen whether any other entertainment companies will be the beneficiaries of another short squeeze or if smart investing and onscreen retellings are the best bet. While AMC may have been a unique case — its low stock price (under $5 before the spike) combined with its high concentration of shorts meant that it was ripe for a squeeze and lots of casual traders could afford it — there may be other entertainment-related stocks that could be pressured.
Discovery Inc. and ViacomCBS, while much larger than AMC, have a significant amount of short interest, and could be soft targets in the future, one Wall Street analyst notes to THR. Their relatively high price points (over $42 and $52 per share respectively, as of Feb. 1) could limit interest. Still, they both have a story that can be used to “sell” the trade, with Discovery having just launched its new Discovery+ streaming service, and ViacomCBS set to launch Paramount+ this spring. The story still matters for initiating these bets. In the case of AMC, for example, the online traders declared that they were trying to “#SaveAMC,” not to manipulate the market.
Elsewhere, Leon Cooperman, the billionaire CEO of Omega Advisors, found another way to cash in. He told CNBC that he had sold much of his holdings in AMC Networks when the share price hit the “low 70s” during the rally. AMC Networks, of course, is not the same company as AMC Entertainment, but its stock price rose by more than 20 percent overnight all the same, apparently driven by traders searching for “AMC” in their preferred trading app. Cooperman owned more than 750,000 shares in AMC Networks, according to his last securities filing. He paid an average of $38 per share.
Even if no more struggling companies get a similar boost, McKay says there is a clear upside to the GameStop scandal: It exposed the real forces behind what’s been going on for decades in America, namely Wall Street billionaires like Steve Schwarzman and Paul Singer “bankrolling the right wing and their white nationalist conspiracy theory distraction campaign” in order to “rob regular people blind” while no one is watching. “I really hope the Reddit group grows past this fantastic prank phase and becomes a real market force,” says McKay. “Maybe people will stop buying lottery tickets, instead buy a few stocks and keep beating the crap out of Congress to actually represent them like they’re supposed to.”
A version of this story appeared in the Feb. 2 issue of The Hollywood Reporter magazine. Click here to subscribe.
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