New • COVID-19 Report
Reddit goes to Wall Street: Who are the DIY investors behind the Gamestop saga?
Tuesday, February 2, 2021 • 4:30 PM EST
1. Based on deposit transactions, Robinhood continues to be the investment platform of choice, but their recent decision to freeze trading of GME resulted in a loss of 16.5% in deposit share in one day.
2. Survey data suggests these investors are inexperienced: 44% of GME and/or AMC stock owners have been investing for less than 12 months.
3. Despite being new, they are all-in: nearly half (42.6%) made their biggest-ever DIY trading investment in the past 4 weeks.
4. Top motivator to invest in GME and/or AMC was for a quick financial profit (44.6%), to invest for long term growth (19.5%), or to spite big hedge funds and institutional investors (16.1%).
In a matter of weeks, Gamestop’s stock price soared on the backs of Reddit traders. In our initial report on Gamestop, we analyzed the company’s revenues and average order value from our first-party transaction data. In this report, we’re looking at the other side of the equation: major trading platforms like Robinhood, TD Ameritrade, Fidelity, Vanguard, and others. We analyzed deposit levels and share of deposits by platform. Further, we surveyed users who had deposited into major platforms, asking them about their investing experience, their investments in Gamestop (Ticker $GME) and AMC Theaters (Ticker $AMC), and whether they like their primary trading platform.
Our deep dive into financial investments during COVID-19 showed despite economic troubles brought on by the pandemic, people seem to be investing more and Robinhood was the clear winner in terms of deposits. The platform consistently led the market throughout 2020, and saw significant growth in deposits throughout January 2021 as the ‘Gamestop saga’ was heating up.
Smaller platforms such as Interactive Brokers, TastyWorks, and WeBull - also saw a significant boost in deposits in January 2021.
The data suggests the exponential rate of deposits into Robinhood was at the expense of other platforms. Robinhood’s deposits as a share of overall deposits grew significantly, capturing 40.2% of all deposits in October 2020 and hitting 48.7% of all deposits by January 2021.
Who are these DIY Investors?
In November 2020, individual investors in r/WallStreetBets noticed some gains in GME stock, but also noticed large Wall Street hedge funds were shorting the stock. The community began to rally against the largely short position, initiating the very beginning of what would become the GME ‘short squeeze.’ Moving forward to January 2021, Gamestop announces that Ryan Cohen and two of his affiliates receive positions on the board of directors - further increasing the buying pressure of the stock. With this support, and social media influences, the stock began to rally to all time highs.
Investors heavily skew male (75%) and are largely young (77% are 18-35). They also tend to be high income earners: 53% make over $75K annually.
The trade freeze and blowback on Robinhood
Driven by social media frenzy (and increasing mainstream media coverage of the saga), GME’s stock price more than doubled from $147.98 USD on January 26th to $347.51 USD on January 27th. After the stock jumped on the 27th, so too did deposits into Robinhood. The platform went from 47.6% market share of deposits to 64% in a day.
Then Robinhood restricted trading for GME on its platform. The January 28th move caused the stock to tumble back down to $193.60 USD that day. Similarly, huge amounts of money left Robinhood as investors sought alternative ways to buy GME. Robinhood’s share of deposits dropped to 47.5% by the 29th with TD Ameritrade and WeBull gaining the lion’s share of Robinhood’s lost business. For a full breakdown, contact us at Cardify.ai.
After immense backlash, Robinhood re-opened trading, but only with limited positions, on January 29th.
Despite the outpouring of anger towards Robinhood, GME / AMC stock holders tend to like their platforms. When surveyed, 13.4% of people reported a negative experience leading them to seek a new investment platform. By contrast, 62.1% said they had a positive experience with their main investing platform and 23.2% said they had a negative experience, but won’t be switching platforms over it.
Getting to know GME and AMC stock owners
We dug deeper to better understand the DIY traders by surveying them about their investing experience, their investments in Gamestop and AMC Theaters, and their motivations. It’s no surprise that Robinhood took the heat when they restricted trading, since 33% of Robinhood DIY traders owned GME and/or AMC stock (compared to an average 25.7% on other DIY investing platforms).
The majority of AMC / GME investors are inexperienced with 44% having less than 12 months of experience investing, and only 24.5% have 1-2 years’ experience.
Further, the group is making larger investments than ever before: nearly half (42.6%) made their biggest-ever DIY trading investment in the past 4 weeks. A significant chunk of GME and/or AMC owners (14.8%) allocate more than 51% of their liquid assets to DIY investment.
When asked why they invested into AMC and/or GME stock, the most common answer was quick financial profits (44.6%). The second most common answer was the investment was part of a longer term investing strategy (19.5%), and the third most popular was to spite big hedge funds and institutional investors (16.1%).
Our data also confirms GME and/or AMC owners get their investment information on social media: 31.5% said Reddit and 16.8% said Facebook. The third most popular source was word of mouth, at 14.4%.
A question of money
GME and/or AMC stock owners don’t have a consistent belief about the impact of Robinhood’s trade freezes on their profits. Nearly half (46.6%) think they lost money due to freezes. The other nearly-half (49.7%) believes they didn’t lose any money, while the rest aren’t yet sure. However, the Gamestop saga is not over yet. As of February 2nd, the stock was hovering around $225 USD, down from its peak but well above its 2020 average of about $15 USD.
As Redditors proudly say they are ‘holding the line’ and will continue to own GME or AMC stock just to spite Wall Street, others are questioning whether investing in GME or AMC ‘for the movement’ could cause them real losses. In the meantime, as rumors swirl about a federal investigation into Robinhood’s trading freeze and a class action lawsuit already filed against the trading platform, only time will tell what happens next.