GameStop Saga: Fuel By Social Media & Online Brokerages

Published : Jan 31 , 2024

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The GameStop Saga is the beginning of a new trajectory in the world of investing. Never have you seen the power of individuals (investment-interested communities) interchanging ideas and information about their investments that can beat the deep pocket hedge funds. Individuals, your ordinary folks, are buying up stocks and debts of companies online. Facilitated by online brokerages and financial apps, individuals can invest through their smart-phones and paying using virtual debit/credit cards.  


On 30th December 2020, GameStop, a video game retailer that is listed on the Nasdaq, ended the year with a closing price of $4.71. By the end of January 2021, the share price spiked to $81.25, an increase of 16 times ! Which means if you had invested $1 in Dec 2020, you would have made $16 by 30th January 2021 – wow.! 


Unbelievable but it was true. It just proves that the new way works – harnessing the collective power of the individuals exchanging ideas and beliefs (including hearsays, rumours, fake news, etc) on omnipresence social media riding on the seamless way to buy/sell stocks with just a click and a dash of the credit card on your smartphone – anytime, anywhere, any position (sleeping, sitting, squatting). The world of capital market and securities investment has changed dramatically from this point onwards.


Individuals can simply invest in companies’ shares and debts and various financial instruments all online with the help of investing apps like RobinHood. Fuelled by the responses of millions of individuals, who had all the time during the corvid travel restriction, to act on stock tips and comment on community forums like Reddit among their 40 million members. Within hours, the stock spiked as a result of positive “chatter” while the big hedge funds lost $20 billion betting the stock to fall.


Now it is so easy and powerful for the individual investors, as a collective voice, to dictate the direction of how the stocks they invested in go. Their comments, nudging, tips, hearsays, analysis, suggestions, suspicions, speculations all can drive the way the stock should go. Any company raising funds and securing investors cannot afford not to work closely with these communities via the various social media they are hosted on. You need to be interacting with your stakeholders via whatsapp, facebook, tik-tok, wechat, discord, reddit, linkedin, instagram and be aware of how discussions are going on, ensure mis-information and mis-representation are cleared.


Many private equity platforms “PEX” make it attractive and easy for individuals to read companies’ Offer Memos, Pitch Decks, SEC filings, Subscription Agreements and have forums with Q+A and testimonies from lead investors and industry leaders. Investors need not switch to another app or site and can simply e-sign their investments and pay for it via Google or Apple pay – all seamlessly within minutes.


Many PEX even help companies “Issuers” to form and host their Investor Relations Community “IRC” to help disseminate announcements, disclosures, shareholders’ update, quarterly reports, financial statements, SEC filings and material information. These timely information released to the investors and media make issuers more transparent and more in tune with best practice corporate governance standards. 


Social media, online communities, investment apps, private equity platforms are the new principal players in this new eco-system of issuers, investors and interchanges. 


This is the best time to tap into this megaforce and get them to be interested with your ventures, even just to chat about it positively, and for just $100 these investors can now be part of your promising companies.


Now any company can simply go online to raise funds to grow. The trick is how to get into the communities and get them to chat about your deal and invest a little sum to get the relationship going. The more seamless, painless and frictionless, the better.


There are instances of issuers who have nice looking pitch decks, in depth offer memos and attractive websites but could not raise the money via the PEX after spending money on getting their accounts and offer memos reviewed by accountants and lawyers. Each issuer could have spent between US$10,000 to $25,000 but did not meet the fundraising expectation. It may be due to the company per se, the offer price, the target investors, the social media used and the way the offer is presented. There are no absolute failures here. Issuers can adapt and adjust accordingly to learn what works and what does not and soldier on till the funding objectives are met. Within minutes or hours, issuers can re-package and present their offer differently and get it re-listed; they entice investors with new versions of EDM (electronic direct mail) and check for their responses. This is the direct response tactic of eFunding.