The GameStop Stock Saga: A Postmortem
Milton Ezrati, 07 February 2021
So much has been written about GameStop stock it seems pointless to offer yet another take on its saga now. It also seems pointless to guess what motivated the Reddit crowd or why the short sellers hung on for as long as they did. All that is water over the dam, as the saying goes.
At this point, the adventure carries two important and age-old investment lessons: One is that taking part in a buying frenzy leads to at least as many losers as winners, usually more, for there are many in the Reddit crowd who enthusiastically bought at highs and have suffered significant losses. The second is that shorting is a very risky business. Both lessons should now be clear, even when seen through the tears of those who lost. What deserves attention here is that, with a few notable exceptions, the media made a hash of covering these events.
Outside those few experienced financial journalists, most media coverage relied on a silly and misplaced David and Goliath story. The story, one must admit, is powerful, the pivotable point in the Old Testament’s First Book or Samuel. Who does not cheer as the brave shepherd boy puts down his harp and picks up his sling shot to bring down the great bully? The problem with media reliance on this Bible story is that it has very little to do with the GameStop stock episode.
No one was being a bully, and the Reddit crowd was not especially brave, in large part because many seemed not to realize the risk they were taking in pumping up the price of a stock of a company that was running losses. With no bullying and no courage, why bring up the ancient story at all. Yet the media could not resist.
