From Wall Street to High Street: How Reddit’s effect on the stock market impacted Ohio State students

Carson Hutton
Thu, 11 Feb 2021 02:36:10 +0000
Arts & Life, Instagram Page, News, Pop culture, amc, AMC stock, arts, arts and life, Columbus, commission-free trading, dogecoin, freezing stocks, gamestop, GameStop stock, hedge fund billionaires, hedge funds, life, market manipulation, Ohio, ohio state, ohio state reddit, Ohio State students, ohio state university, osu, pop culture, reddit, reddit GameStop stock, reddit stock market, robinhood, robinhood investing, robinhood restrictions, stock [and 14 more]

Ohio State students joined others across the nation to go head-to-head with hedge fund billionaires in a subreddit-inspired game of investment chicken. Credit: Christian Harsa | Asst. Photo Editor

Ohio State students joined others across the nation to go head-to-head with hedge fund billionaires in a subreddit-inspired game of investment chicken.

As a byproduct of the WallStreetBets subreddit sparking an effort to turn the tables on hedge funds who would traditionally benefit most off of dying stocks, many people new to investing hopped onto the trend. Seeing the rise in the price of stocks that usually can be bought cheaply influenced many college students who thought it would be a simple way to earn money to buy.

Hayden Kobelak, a second-year in architectural engineering, said he chose to invest in the hope of making money.

“Everyone backed the play, and it was a collective movement to make the small investors money, and it was working,” Kobelak said.

Investing in Blackberry, Nokia and Dogecoin, Kobelak said he ended up breaking even on his $1,000 investment.

John Kagel, university chaired professor of applied economics at Ohio State, advised against the idea, despite the temptation felt by many to make easy money while undermining billionaires.

“As a financial decision, it was stupid, as it created a ‘bubble’ in stock value,” Kagel said. “So if you did not get out fast enough, it could get to be expensive as you are holding shares that you bought as the price was going up. And now, the price is dropping, so to sell, you are selling at a loss.”

Josh Greve, a third-year in finance, said he bought two shares in GameStop and one in AMC for a total of $606 invested. He has not sold yet, but he is currently down $500.

“I haven’t sold yet because I don’t see the price going much lower, so I’m holding out just in case it shoots up again,” Greve said.

At its peak, the push from WallStreetBets caused the GameStop stock price to increase 1,745 percent to $347.51 per share, and the AMC stock price to increase 839 percent to $19.90 per share, according to MarketWatch.

Robinhood, a popular investing app known for its commision-free trading, received backlash after freezing the purchase of GameStop and AMC stock.

Greve, Kobelak and Kagel all said Robinhood freezing the stock purchasing highlighted the dark side of turning investing into a hobby.

Greve said he used Robinhood to invest and he thought the restrictions placed by the app were unfair.

“Restricting people from purchasing not only caused panic, but allowed some hedge funds, who at the time were scrambling to make up their losses, time to manipulate the prices until they started to decline again,” Greve said.?

Robinhood released a statement Jan. 28 in an effort to explain their restrictions and offer educational resources to inform customers.

“We continuously monitor the markets and make changes where necessary. In light of recent volatility, we restricted transactions for certain securities to position closing only. We also raised margin requirements for certain securities,” Robinhood said in a statement.

Kobelak said he was upset by the power these companies have over the stock market.

“I think what they did is clear market manipulation and insider trading that screwed the small guys and made Wall Street rich,” Kobelak said.

Kagel said he would have advised against students hopping on the trend from the start.

“It was not smart,” Kagel said. “Financially, to hop on the investing trend, you open yourself up to substantial losses depending on how much you invested.”

Although he did not experience the expected rise in price of his shares, Greve said following this trend and investing when he did served as a learning experience.

“Even though this isn’t the result I expected, I learned that investing shouldn’t be about trying to make a quick buck, but instead investing in a company or industry that you believe will succeed in the future,” Greve said.