Alexis Ohanian of Reddit said on Thursday that the GameStop stock market frenzy, which comes largely from the online platform on which he contributed to its creation, is a turning point in the US investment landscape.
“I think this is a fundamental moment. I don’t think we’re going back to a world before this, because these communities are a byproduct of the connected internet,” Ohanian said in a Squawk Box interview. “Whether it’s one platform or another, this is the new normal.”
Ohanian said the short stress of GameStop, which has fueled the video game retailer’s stock by almost 2,000% this month alone, shows the disruptive nature of the internet.
“I’ve been watching the internet for the last 10, 15 years, because of the growth of social media and this infrastructure, I’m bringing a bottom-up revolution to so many industries,” said Ohanian, who co-founded Reddit in 2005 with current CEO Steve Huffman . “I’ve seen this in the media, I’ve seen this in so many sectors, and now it’s going to fund.”
The massive rally of GameStop shares put financial pressure on hedge funds that shortened the stock. It is an investment strategy in which people or institutions sell borrowed shares in the hope of buying them smaller again in the future. They return the borrowed number of shares and collect the price difference.
Some high-profile sellers have indicated that they have withdrawn from their positions in recent days.
Ohanian said he believes there is another way to do this, beyond just making money for users of online forums, such as RedSit’s WallStreetBets. “Just looking at the comments on the internet is very personal for a lot of people and a chance for Joe and Jane America, the kind of stock retailers, to come back and push back these hedge funds,” he said. he said. said.
“I really think this is really the beginning of a new era for how we perceive public markets and then consumer interaction with it,” said Ohanian, who resigned from Reddit’s board in June and called for a black director who to replace it.
The meteoric rise of GameStop has raised concerns for some people, who say the stock needs to return to Earth. Just four months ago, worth $ 6 a share. It closed Wednesday’s session at $ 347.51 and climbed into Thursday’s premarket.
William Galvin, Massachusetts’ chief securities regulator, told CNBC on Wednesday that retail investors were in a “really difficult situation.”
“They think they’re missing if I don’t bet on them,” he said. “I don’t quite understand what I’m doing. I think small investors like this, insensitive investors, will be hurt by this.”
Ohanian also stressed the need for retail investors to be “careful” about how they allocate their money. “There is a very important role to play in protecting the little guy,” he said. “It’s just that so many of these guys say very clearly that they’ve felt pretty unprotected for so long.”
Billionaire technology investor Chamath Palihapitiya also defended the right of individual investors to try to push Wall Street professionals. He briefly joined the GameStop trade and donated profits to a small business aid fund.
In a CNBC interview, he mentioned that one of the reasons Redditors and other online investors reduced GameStop to zero is because more than 100% of its shares were short-circuited, making the shares extremely susceptible to short pressure. “For a normal person, it makes no sense. But for a mathematician on Wall Street, this is the game that was played. And that game was canceled,” Palihapitiya said in “Rapid Money: Halftime Report.”
As GameStop shares rose this month, short sellers sought to limit their potential losses by buying shares at higher current prices. These actions, combined with continuous online advertising, have helped propel the stock to its high levels.
“I don’t know where this is going from here, other than new systems appearing to start adapting to this new reality,” Ohanian said.