One company was on the minds of retail investors throughout St. Louis U. High these past two weeks: GameStop. 

The story begins with a Reddit community called WallStreetBets—a name known to many SLUH students. WallStreetBets is an online community of non-professional, retail investors who discuss investments, make predictions, and share screenshots of their profits or losses. Last week, they made headlines as their members led what investment bank Goldman Sachs called the biggest short squeeze in American history. Whether it be in the trenches or from the sidelines, many investors at SLUH soon found themselves talking about the craze. 

“WallStreetBets became popular back in quarantine when the markets were down a lot and a lot of people were betting on risky derivatives like options on the S&P 500 and Tesla in particular,” said senior IBL leader Jack Rosenstengel. “I joined around then. I haven’t been making the bets, but it’s fun to scroll through to see the massive wins and losses people have.” 

According to Investopedia, short selling is an investment strategy that predicts a decline in a security price. This is done by borrowing shares of a particular stock, selling the stocks (remember, one does not technically own the stock at this time), and then buying the stock in the future at the predicted lower price to return to the lender. A short squeeze occurs when a stock that is being heavily shorted jumps in price, often forcing the shorting investors to buy the stocks to return to the lender to offset future costs. The investors who jump on the bandwagon of a company that is being shorted (like GameStop) can then make a lot of money as the stock rises in prices. 

GameStop, which at the time was being heavily shorted by hedge funds and other financial entities, began 2021 with a price of $17.25 per share. After remaining relatively stable, on Jan. 12, the share price began to rise. By Jan. 26, shares were worth $147.98. Investors were not done with the squeeze, though. By Jan. 27, shares had surpassed $200. They would reach their high of $483 on Jan. 28 and remain around $300 per share until Feb. 2 when their price began a tumble that has continued this week.

Perhaps the most intriguing GameStop success story came from senior Thomas Matyiko. After watching a convincing YouTube video and reading of a potential short squeeze, Matyiko decided to go all in. He purchased a call option (essentially the right to purchase a stock at a later date for an agreed-upon price) after watching the stock jump from $25 to $30. When it was all said and done, Matyiko had made a great profit. 

“I got pretty lucky, and I earned 23 times my initial investment,” said Matyiko. 

Many smaller retail investors like Matyiko experienced issues relating to the GameStop stocks from their app, Robinhood, which announced last week that it had restricted GameStop trading, sending the stock price down. Because of Robinhood issues, Matyiko lost some of the money he had gained; however, he still came out with a large profit. Despite this, he admits he got lucky and will probably move on from Robinhood after his success. 

“I’m all out, I’m definitely gonna quit Robinhood,” said Matyiko. “I don’t even know if I’ll continue doing this type of investing because obviously, this is like a once in a lifetime, really lucky thing. I’ll probably just be doing like a Roth IRA and normal low-risk things from now on.” 

He also wants people to be careful when dealing with crazes like this GameStop fad. 

“I would just say don’t try to do what these people are saying,” said Matyiko. “They’re not smart, and I just got really lucky.” 

The GameStop situation revealed a new shift in students’ interests towards investing. According to Ignatius Business Leaders moderator Kevin Foy, multiple factors have led to this. These include the Stock Simulator Game that the club has been sponsoring for years. More importantly, he said, it was driven by Robinhood coming on to the market with $0 investment commissions, forcing competitors to do the same. Soon, almost every broker offered free trades.

“It is fair to say that in the last two years the interest base of IBL has shifted heavily toward investing and away from other things that IBL used to be interested in,” said Foy. “You can’t trade tiny transactions with a fixed transaction cost and not just get hammered. When that transaction cost goes away, regular investors without a lot of money are able to actually trade real money. That hit SLU High a couple of years ago, and I think it only takes a handful of guys to be talking about real money to fire up a bunch of other dudes.” 

He believes that combining the lessons many IBL members have learned in the club and the accessibility to the no commission investing platforms have created a perfect storm for SLUH guys to get involved in the market. IBL hosted a meeting last Thursday to discuss the volatility and what went into making the short squeeze.

“We sought to explain what happened and what the implications were. We talked about everything from, you know, the fundamentals like what is short selling what is short-squeeze, what the margin calls are,” said Rosenstengel. “We defined basic terms for people so that anyone could come and learn about what happened, and then we talked about the actual situation so what hedge funds were doing what the people on Wall Street bets.”

Derivatives—otherwise referred to as positions that speculate on the derivation of an underlying asset class (they are essentially a contract between two parties speculating about future prices)—gives the students the short term gratification they look for. 

“The average high school kid does not particularly want to wait 15 years for an appreciable change to his account. So whether it’s options or short sales or anything like that, the younger you are, the more sexy and cool technical investing is,” said Foy, referring to the investment process of analyzing past trends to determine short term profit. “If you’re a longtime IBL member or you already understand the basics of technical investing, you understand the basics of the derivatives market. You probably are paying attention to the social media world of investing, like WallStreetBets, so SLU High was just primed to be interested in this and know more than the average bear.”

Foy suggested it is helpful to see derivatives as an insurance of sorts for the financial market. While insurance can be a good thing, it can also be bad. 

“Insurance can also be bad when it creates, in the insurance world, what is called a moral hazard. (For example), I take out a life insurance policy that is so valuable that now I have an incentive to kill someone,” said Foy. “You’re not allowed to do that in the life insurance world, but you are allowed to do it in the stock market. The question is, will regulators come in and regulate the way some of these derivative markets allow for this to happen?” 

Overall, however, Foy is convinced this event will be similar to trends like Bitcoin that ran through SLUH a few years ago. 

“I think this is just a blip on the radar,” said Foy of his analysis of the situation in the grand scheme of the market. “If you look at what’s happening in the market as a whole, not much is really happening. You just got crazy volatility in this tiny little thing … the buzz was Bitcoin, and the buzz is GameStop now.” 

“This is more of an internet meme than anything else right now,” said Carson Cornett. “As most big internet fads do, it’s probably going to die out, and all the kids who tried to get in on this probably will lose a lot of money. Not just on GameStop, but if they continue to try to invest or operate with these derivatives that they don’t really know what they’re doing.”

While most students weren’t directly implicated in the GameStop short squeeze, the news and fascination with the event have drawn a lot of dialogue from the students at SLUH. 

“This event has drawn a lot more students to the stock market. I think during free periods, you see a lot more people looking at stocks,” said Rosenstengel. “Even if they aren’t trading, they’re looking, which I think is really going to create a much bigger culture where at SLUH, it’s normal for friends to talk about different stocks and investing, which I think is really cool and pretty unique to SLUH.”