Financial Pipeline Rating: 4/5
Financial Content: 5/5
Dumb Money was pretty good – and that’s despite knowing how it ends, which is no easy feat.
The 2023 movie portrays a mix of real and fictionalized characters and events from the GameStop frenzy of 2021 in a way that the “dumb money” crowd can understand.
We see Keith Gill’s online alter ego Roaring Kitty taking the WallStreetBets Reddit subspace by storm with his “GameStop to the Moon!” call, signature kitty t-shirt and karate kid headband. He also went by the moniker, DeepF***kingValue (DFV).
Gill had a rather inauspicious start in September of 2019, when he invested roughly $53,000 in GameStop common stock (NYSE symbol GME) and long-dated options, posting about it on Reddit. He was openly criticized for the trade, but stuck to his convictions that the stock had fundamental value and was unduly targeted by short sellers, to justify the transaction.
DFV continued with regular social media updates on his position – and its worth – and people ate it up. They were rooting for the little guy in this David versus Goliath battle between retail investors and hedge fund managers. And once they hit ‘Buy’ on a GME order, they were on the same team. If he was in, they were in.
Redditors on WallStreetBets bought as much stock as they could afford, sending the price soaring and forcing the hedge funds that bet against the company to capitulate — what’s known in the industry as a “short squeeze.”
“Diamond hands” wasn’t just a buzz term to Roaring Kitty, as he had his mettle tested repeatedly with hedge funds threatening to squash the army of small investors pushing up GameStop’s price. Not to mention price volatility was off the charts, with huge trading volumes and big moves on the tiniest bit of news – or no news at all.
Colossal paper gains weren’t enough to convince Gill to close out his position. He exercised those long options with the share price around $40 to acquire even more shares. After doubling down on his position, GameStop did indeed seem headed for the moon!
On January 27, 2021, the price surged to a “before the opening bell” valuation of more than $500 per share, which translated into an increase of 3000% in just 10 trading sessions. Roaring Kitty’s GameStop investment was worth $48 million at its peak and he held 200,000 shares, which is unheard of for an individual investor. The stock closed at its all-time record high of $347.51 on this day.
And he still didn’t sell a single share. Diamond hands indeed.
Then, nobody wanted to sell because there were no buyers after Robinhood and other brokers halted buying in the stock, citing clearinghouse deposit requirements that if unmet could threaten their ability to remain operational. There was anger and confusion about Robinhood’s decision to shut down trading in GameStop, and the stock price cratered in subsequent trading sessions.
It bounced around for a while and then Gill cashed out in April 2021 to the tune of $35 million. Some of the movie’s other protagonists don’t fare as well.
The GameStop mania sparked by Roaring Kitty sharing stock analysis and portfolio details with the masses triggered an unprecedented spike in retail trading volumes, launched myriad debates about regulation and how markets work – often against the little guy – as well as how social media could be used to influence stock market activity.
To sum it up, I like the movie, with bonus points for a solid soundtrack (although it’s definitely not G-rated).
