Editorial:Retail investors fighting hedge funds 'for justice'

【明報專訊】The drama of an online army of retail investors battling hedge funds on Wall Street for the last few days has aroused hot discussions everywhere. In the era of financial globalisation, big funds call the shots, and there are endless tales of them making huge profits by short selling. Retail investors often end up as the losers as the entire set of rules of the game is always tilted in favour of the big investors. In the latest incident, the online army of retail investors has managed to amass a huge sum of capital to defeat the hedge funds by means of ''short squeezing''. Their subversion of the conventional order on Wall Street is a proof of the mightiness of civic empowerment in the social media era. The fund industry cannot practise ''heads I win, tails you lose'' and forbid retail investors to win money. However, it must be pointed out that there are a lot of subjective and objective conditions behind the victory of retail investors. Those who think that social media has already changed everything and the drama can be copied anywhere think so at their own peril. In the US, wealth is increasingly concentrated in a handful of people. The battle between retail investors and big funds this time carries a heavy tinge of a populist rising against the establishment. As the antagonism between the elites and the common people aggravates, there may be even more serious social crises ahead.

The investment saga that has caught worldwide attention started unexpectedly when GameStop (GME), an American digital game retailer, was named by a hedge fund as a short selling target because of GME's huge yearly deficit. With a history of 37 years, GME was once a mecca for US gamers. Seeing the imminent destruction of their collective memory by hedge funds, WallStreetBets, a large sub-forum on US online social media platform Reddit, called for the purchase of GME stocks. The appeal gained the support of many netizens and the share price of GME rocketed as a result, attracting even more retail investors to follow suit. At one time, GME's share price was around 18 times its price at the year's start. Instead of making immense profits from short selling GME, the hedge funds suffered disastrous losses due to short squeezing. They even had to borrow money to save themselves. After this major victory, the retail investors extended their battle line to other stocks named by hedge funds for short selling and even the silver market. In the eyes of supporters, this is an ''uprising'' that robs the rich to help the poor. In the eyes of large funds and financial institutions, it is an ''unrest'' that smashes the order of the markets.

The investment industry estimates that the hedge funds have suffered a total loss of US$20 billion. In the early trading hours of the US stock markets last night (February 1), the share price of GME fell back but the price of silver spiked 11%. The subversion of the power relation between ordinary people and the conventional elite by social media has been a long-standing topic discussed by many sides. It is not something previously unknown. Still, the making of a mickle from many a little by the online army of retail investors to counterattack the big funds is indeed unprecedented. It is hard to foresee the coming development of this ''uprising'' of retail investors. The only certain thing is that as the GME victory has hugely boosted the morale of the online army of retail investors, they will not retreat in the short term. There may be even more torrents in the investment markets in the coming weeks.

Although some describe this ''uprising'' as a continuation of the spirit of the Occupy Wall Street movement, it is not desirable to glorify the ''uprising'' blindly. The founder of WallStreetBets has pointed out that there is more and more hate speech on the forum and some members are obviously white supremacists. Whether the ''uprising'' of retail investors will get out of control and be spoiled and whether it will become an act of vengeful sabotage in the form of ''violence against violence'' in the investment sector are questions that need close attention.

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■/ Glossary 生字 /

uprising /ˈʌpraɪzɪŋ/ :an act of resistance or rebellion; a revolt

vengeful /ˈvendʒfl/ :showing a desire to punish sb who has harmed you

sabotage /ˈsæbətɑːʒ/ :the act of doing deliberate damage to sth to prevent an enemy from using it


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