By Alexandre Hawari, CEO of Akama Holding

Alexandre Hawari, CEO of Mediaquest and Akama Holding

The GameStop episode, assuming it is just that and that the lessons from it will be learned, is a telling  tale of where our economies are today. First, it’s a sign of the difficulties the retail sector is facing, even  in the booming category of video game content. Digital is trumping physical here too. 

Second, it’s a sign of the rebellion against the established order, call it the 1%, big business,  governments, threats to the environment… There is a noticeable shift in the balance of power between  the general public and what we could call the ruling class. Goliath had better watch out, Davids are  clubbing together and they’ve got social media on their side. 

What started as a candid discussion platform for retail investors took a life of its own. Reddit’s  WallStreetBets gathered an unintended and sometimes nasty momentum. That’s a sign that the  common man wants a seat at the top table, in this case Wall Street, and disrupt its elite. Some will make  money, with GameStop or other stocks, many will lose tidy sums. 

Because it’s speculation and it’s risky. If big boys with degrees, experience and deep pockets can lose at  this game, what about the little guy? 

The rebellion that is swirling around highlights the growing frustration with what can be seen as an  injustice, when wealth is unfairly gained and distributed in the eyes of many. What’s happening to the  GameStop stock price has nothing to do with its business reality and its financial performance. Around  2011, GameStop was generating nearly $10 billion in revenue per year. But by 2019, this dropped to  just $6.4 billion and before the pandemic, it was already laying off employees and planning to close  more than 1,000 stores. A 1000%-plus stock price rise, in these conditions, isn’t just disconnected from  reality. At best, it’s speculation, at worst it’s manipulation. It’s what gives capitalism a bad reputation. 

When share prices are disconnected from the financial performance their corresponding stocks,  investors will rightfully be concerned or hesitant. Who can expect them to make sound and reasoned  long-term investment decisions on the back of social media buzz and mob rule? While it was made  possible by the influx of new retail investors into the market, the GameStop saga could actually deter  long-term investors away from shares, an investment vehicle that could now become a lot riskier. 

So, what’s the upside of all this? 

For starters, it’s shown that the invincibles of Wall Street are fallible. The threat isn’t coming from their  peers this time but, and that’s a first, from Main Street. Maybe that’ll knock some humility into them. 

It’s also proved, once again, that authorities and regulators have difficulty in deciding what their role  truly is in situations like these. It is urgent they define what is right and what is wrong, and quickly because we’ll have other instances for sure. They have acted in the past, but often too late, way after  the event. They’ve been equally slow at addressing the dominance of GAFA on the media industry. So  far, few regulations have been put in place to protect consumers and competitors. 

What’s most interesting to me is the growing appetite of retail investors and their use of social media to  get into the action. We first saw this with day traders and the dotcom boom two decades ago. Financial  markets are being democratized and, in some way, simplified. That’s to be celebrated but, as the  GameStop story shows, it doesn’t always bring out the best in us. If there are to be winners, there will  need to be losers. It’s not as easy as it seems. 

Harnessed properly, this momentum could lead to an army of educated and informed retail investors  acting towards constructive, rather than destructive, goals. The Game needs to stop so that serious  business can resume.