When the markets closed on Friday, the share price of GameStop sat at $325, which is a little less than that of Moderna and Johnson & Johnson combined — even though the latter two firms produce vaccine candidates vying to tame the pandemic and the former sells video games in stores shuttered by it. And while Reddit users on the forum r/WallStreetBets have had their eyes on GME for months now, their plan to short squeeze hedge funds on the meme stock bore fruit last week, making some day traders paper-rich, leaving some professionals quite embarrassed, and causing the S&P to dip almost two points overall.
With the attention of the financial world, its regulators, and a newfound audience at home along for the ride, below are three variables to watch to determine how the bizarre saga could unfold in its second week.
Silver futures are now close to a five-month high, thanks to a surge in demand from Reddit traders attempting to expand their raid on Wall Street into the commodities market.
As Bloomberg notes, silver futures topped $29 an ounce within minutes of Asia stock markets opening, and precious metal retailers were unable to process orders over the weekend due to the high demand. “It’s been nuts — over the weekend we saw about three weeks’ worth of accounts-opening in just a couple of days,” a business development manager in Australia told Bloomberg. “Silver spiked at the open this morning as all that volume from over the weekend hit the market.”
The online attention on the precious metal appears to be an attempt to find weaknesses elsewhere in the market. “If it’s exposed that there are more paper claims on silver than actual silver, not only would payoff be enormous, but gold would be next,” said Cameron Winklevoss, the cryptocurrency investor made famous by suing Mark Zuckerberg in college. On r/WallStreetBets, users are cheerleading the effort, saying “SLV will destroy the biggest banks, not just some little hedge funds” and that JPMorgan Chase has been “suppressing metals for a long time. This should be epic. LOAD UP.”
The forum is far from being a unified front. On Sunday night, one user wrote to all “the feds and the media and all the dumb people reading this” that the incoming silver squeeze is “a hedge-fund coordinated attack” to weaken Reddit users’ stance on GameStop. “By buying silver/going long on silver, you would be directly putting money into the pockets of the EXACT HEDGE FUNDS ON THE OTHER SIDE OF $GME.”
Last Thursday, the financial trading app Robinhood (and some other similar services) blocked users from buying stock in GameStop, AMC, and other firms favored by Reddit traders, as New York’s Eric Levitz explains:
In a statement, Robinhood insinuated that this move was motivated by a paternalistic concern for keeping its customers “informed” amid the market’s “volatility.” But subsequent reporting suggests that the firm’s true motive was both less selfless and more coherent: Faced with extraordinary levels of trading, Robinhood was running low on the cash necessary to pay its customers when they sold shares and post the collateral demanded by its clearing facility.
Though the app has eased up on its trading restrictions, several limitations remain. As of Sunday, users can only buy one GameStop share (and up to five options contracts) and up to 10 AMC shares and options contracts. This limited access could cause r/WallStreetBets users long accustomed to the app to seek more open trading pastures. On Thursday, before Robinhood was slapped with a class-action lawsuit for restricting trading, Redditors were discussing moving elsewhere: “MAKE SURE YOU HAVE OTHER BROKERS,” one r/WallStreetBets user wrote on Sunday night. Though other services like Webull did not have restrictions on the targeted stocks as of Friday, if they do apply similar measures, that would naturally limit the desire for users to leave Robinhood.
Though the run on GameStop has made some Wall Street bettors rich, the party line on the forum is to hold the line on Monday by holding their GameStop shares — which keeps the plan intact for another week and puts them at risk of not getting out before the bubble bursts. On the forum (which celebrated its ninth birthday on Sunday night), users boasted that they still liked the stock and continued to post screenshots of their GME holdings. Keith Gill, the architect of the plan, also still appears to be in as of Friday, when he posted his total earnings of $46 million thanks to GameStop’s rise.