Alexis Ohanian of Reddit said Thursday that GameStop’s stock market frenzy, which originated largely on the online platform it helped create, is a turning point in the U.S. investment landscape.
“I think this is a pivotal moment. I don’t think we’re going back to an earlier world because these communities are a byproduct of the connected Internet,” Ohanian said in an interview with “Squawk Box.” “Whether it’s one platform or another, this is the new normal.”
Ohanian said the short budget GameStop, which has fueled video game retailer shares up nearly 2,000% this month alone, shows the disruptive nature of the Internet.
“We’ve been looking at the Internet now, for the last ten, fifteen years, thanks to the rise of social media and all this infrastructure, they’ve brought a bottom-up revolution to so many industries,” said Ohanian, who co-founded Reddit in 2005 alongside current CEO Steve Huffman. “We’ve seen it through the media, we’ve seen it in so many sectors and now it’s going to fund.”
The massive concentration of GameStop shares has put financial pressure on hedge funds that had reduced shares. It is an investment strategy in which people or institutions sell borrowed shares in the hope of buying them back in the future. They return the number of shares borrowed and pocket the price difference.
Some high-profile short sellers have indicated that they had withdrawn from their positions in recent days.
Ohanian said he believes there is another layer to get a little more money-making for online forum users like Reddit’s WallStreetBets. “Just looking at the reviews on the internet, it’s very personal for a lot of people and it’s an opportunity for Joe and Jane America, the kind of stock retail buyers, to step back and back these hedge funds,” he said. dit.
“I really think it’s really the beginning of a new era of how we perceive public markets and consumer interaction with it,” said Ohanian, who resigned from Reddit’s board in June and urged a black director to will replace it.
The meteoric rise of GameStop has caused concern for some people, who say stocks should return to Earth. Just four months ago it was worth $ 6 a share. It closed Wednesday’s session at $ 347.51 and shot up in the market on Thursday.
William Galvin, Massachusetts’ top securities regulator, told CNBC Wednesday that retail investors are in “a really tough situation.”
“They think they’re lost if they don’t bet on it,” he said. “They don’t really understand what they’re doing. I think investors like that for a short time, unsophisticated investors, will be affected by that.”
Ohanian also stressed the need for retail investors to be “reflective” about how they allocate their money. “There is a very important role to play in protecting the little one,” he said. “It’s just that a lot of these little ones are saying very clearly that they’ve felt unprotected for so long.”
Billionaire technology investor Chamath Palihapitiya has also championed the right of individual investors to try to boost Wall Street professionals. He briefly joined the GameStop trade and is donating to a small business relief fund.
In a CNBC interview, he noted that one of the reasons Redditors and other online investors downplayed GameStop is that more than 100% of their shares had been short, making the shares highly susceptible. at a small pressure. “For a normal person that makes no sense. But for a Wall Street mathematician, this is the game that has been played. And this game has been undone,” Palihapitiya told Fast Money: Half- Time Report “.
As GameStop shares rose this month, short sellers tried to limit their potential losses by buying shares at current higher prices. These actions, combined with continuous online advertising, have helped drive actions to high levels.
“I don’t know where it’s going from here, unless new systems appear to start adapting to this new reality,” Ohanian said.