The trader from Massachusetts, known as “kitty,” has become an example for traders looking to challenge Wall Street. Attracting little attention initially, the trader made a bet on the struggling company, GameStop, and actively discussed it on social media platforms throughout the year. He promoted the idea that GameStop shares were undervalued and inspired online traders to invest in them, sparking a phenomenon called a short squeeze. Inspired by the trader’s ideas, online traders took on GameStop shares, driving up prices using options contracts on free online trading platforms.
Many spent hours discussing the company’s financial details and documents, and when the price of GameStop stock surged, hedge funds with short positions began panic-buying shares, leading to a price increase from approximately $4.56 to a maximum of $347.51 per share by January 27, 2021. This sudden surge in GameStop’s price and the increase in short positions led to a short squeeze, fueling interest in the company and increasing activity on the r/WallStreetBets subreddit. As a result, the subreddit community grew significantly, and the price of GameStop stock reached $492 before falling to $193. The surge in meme stocks prompted a response from brokerage platforms, such as Robinhood, which restricted transactions for certain securities.
The 2021 crackdown on meme stocks led to congressional hearings and class-action lawsuits, including one against the trader from Massachusetts. The trader’s activity also led to increased interest in meme coins, as followers hoped for something big to come, and they bought GameStop shares and pumped up meme coins.