Rise Of Reddit In The Recent

Rise Of Reddit In The Recent

Reddit has been in the news in recent. From airing a 5-second commercial at the Super Bowl to sending the GameStop stock skyrocketing, they seem to have done it all! The cherry on top is a $250 million investment. Let’s dive deeper into all these interesting incidents.

Crux of the Matter

One Pricey Bowl!
 In 2021, a 30-second in-game commercial spot during Super Bowl cost about $5.5 million. The same duration of time cost around $5.6 million back in 2020.

Reddit’s Static Ad
Reddit said it used up all of its marketing funds to get a 5 second Super Bowl ad slot. Their ad started with a video of cars followed by the following static image which many thought be a glitch.

The Reddit ad was among the most-searched Super Bowl commercials on Google on Sunday night. It received 270,000+ upvotes on Reddit as well.

Another Show Of Reddit’s Power
Members of the SubReddit r/WallStreetBets forum decided to send the GameStop stock skyrocketing last month in order to take on the short sellers that had bet against GameStop.

Read more about the GameStop Drama here.

Reddit Raises Money
Recently, the website raised $250 million in funding led by venture-capital firm Vy Capital, which took the social media company’s valuation to $6 billion.

Reddit aired a 5-second commercial that left the Super Bowl fans wondering if it was a technical glitch or an actual advertisement. Read about the details of that advertisement here.

Curiopedia
  • The Super Bowl is the second-largest day for U.S. food consumption, after Thanksgiving Day. In 2015, Super Bowl XLIX became the most-watched American television program in history with an audience of 114.4 million viewers. 
  • As of February 2021, Reddit ranks as the 18th-most-visited website in the world and 7th most-visited website in the US, according to Alexa Internet. About 42-49.3% of its user base comes from the United States.
  • The name “Reddit” is a play-on-words with the phrase “read it”, i.e., “I read it on Reddit.” According to Reddit, in 2019 there were approximately 430 million monthly users, who are known as “Redditors.”

Unique Ads in Super Bowl 2021

Unique Ads in Super Bowl 2021

The social media company Reddit is in the news again. Apparently, they aired a 5-second commercial that left the Super Bowl fans wondering if it was a technical glitch or an actual advertisement. So what did the ad contain? What is Super Bowl? And did you know there aired an ad regarding farmers’ protests? Well, let’s understand what all happened.

Crux of the Matter

What is the Super Bowl?
It is the annual championship game of the National Football League. The game is being played on the first Sunday in February, since 2004.

Good Platform For Ad-Makers?
Super Bowl XLIX in 2015 became the most-watched American television program in history with an audience of 114.4 million viewers. The SB is also second to the UEFA Champions League final, as the most-watched annual sporting event worldwide

Thus, commercial airtime during the SB broadcast is expensive due to the high viewership, leading to companies regularly developing their best ads for this broadcast.

And Then There Was Reddit
The 5-second ad began as a car commercial, with two SUVs racing across the desert. Then Reddit’s logo came on screen, followed by a lengthy statement.

It Worked!
Created by New York-based R/GA, the ad team finished creating the commercial in a day. It was among the most-searched Super Bowl ads on Google on Sunday night and received 270,000+ upvotes on Reddit.

There Was A Farmers’ Protests Ad Too

The ad was not a part of the actual SB event and was aired in certain parts of California. Crowdfunded by GoFundMe, it raised $11,123 within a day and the excess funds were donated to a non-profit called ‘Seva For Everyone’

What Did It Show?
The 30-second ad began with a quote from Martin Luther King Jr. and termed the ongoing farmers’ protest as the “largest protest in history”.

Read more about Farm Laws and controversy around it here.

Curiopedia
  • The Super Bowl is the second-largest day for U.S. food consumption, after Thanksgiving Day. In 2015, Super Bowl XLIX became the most-watched American television program in history with an audience of 114.4 million viewers. 
  • As of February 2021, Reddit ranks as the 18th-most-visited website in the world and 7th most-visited website in the US, according to Alexa Internet. About 42-49.3% of its user base comes from the United States.
  • The name “Reddit” is a play-on-words with the phrase “read it”, i.e., “I read it on Reddit.” According to Reddit, in 2019 there were approximately 430 million monthly users, who are known as “redditors”.

How A Reddit Forum Made Wall Street Lose Billions – I

How A Reddit Forum Made Wall Street Lose Billions - I

What is the logic behind a perennially ailing GameStop that suddenly got fortunate with its stock making an exponential rally? Let us try to understand how a Reddit community group was able to manipulate a suffering stock and turn the huge Wall Street hedge funds down.

Crux of the Matter

What Is GameStop?
GameStop is an ailing brick and mortar game retail company based out of the US. Due to the pandemic and its conventional business format, GameStop’s revenues had hit rock bottom.

What Is Shorting?

  • Shorting involves selling a stock that one does not own.
  • One sells it in anticipation of the decrease in stock price.
  • Usually, a broker provides the service of loaning a stock.
  • Let’s say, Mrs X first sells 1 stock for $5, meaning she owes her broker 1 share.
  • Brokers charge interest on the loan, and of course, the stock is to be returned.
  • Let’s say the price of the stock decreases to $4, and Mrs X covers her position (buys back the stock).
  • By buying back she’s in a way returning the stock to the broker.
  • And in the process, she made $1 [sales price of $5 less purchase price of $4)].

Here Comes The Wall Street Bets

  • Wallstreetbets is a fast-growing Reddit board with more than 2.4 million followers.
  • A few weeks ago one of its members noticed a considerable short position taken by a hedge fund, Melvin Capital on GameStop (GME).

The Unusual Twist

  • Some users on r/wallstreetbets suddenly started convincing the group to buy the GameStop stock, reportedly with a tentative intention of punishing the short-sellers.
  • To everyone’s greatest surprise, the convincing worked
  • Retail traders started buying GME as much as they could.

How Can Musk Not Be There!
An already fiery rally was made wilder with a tweet made by Elon Musk. For the record, Musk hates short-sellers. The tweet alone was responsible for a further 50% surge in external trade.

The Phenomena of Short Squeeze

  • Continuing the previous example, if instead of stock price falling down to $4, it rises to $7, Mrs X would face a loss of $2 ($7 – $5) if she buys back at the increased price.
  • It should also be noted that the loss can be unlimited, as the price can go up limitlessly.
  • A short squeeze occurs when traders like Mrs X are forced to buy back (cover their positions) in case of a massive spike in the price of the stock they have shorted.
  • During a short squeeze, the price of the stock would increase even further when shorters are covering their positions.

Losses In Billions
The hedge funds who had taken short positions on GME were now forced to close their positions by purchasing shares at an exorbitant price. The estimated loss is more than $5 billion.

Curiopedia
  • Reddit was founded by University of Virginia roommates Steve Huffman and Alexis Ohanian, and Aaron Swartz in 2005. As of 2018, there were ~330 million Reddit users, called “redditors”.
  • Robinhood was founded in April 2013 by Vladimir Tenev and Baiju Bhatt. As of 2020, Robinhood had 13 million users.
  • Wall Street’s name refers to a long-gone wall that was erected in the 17th Century by Dutch settlers intent on keeping out the British and pirates. The physical location of Wall Street is in lower Manhattan, where the New York Stock Exchange is housed.

How A Reddit Forum Made Wall Street Lose Billions – II

How A Reddit Forum Made Wall Street Lose Billions - II

In the previous story, we understood what is short selling, a short squeeze, and how a Reddit forum caused a spike in the stock of an ailing company. If you missed that story, you can read it here.

As a consequence of the rise, and increased volatility, some brokers like Robinhood halted trading in the stock of GameStop and others, causing outrage among investors as well as US Congress Senators. Is there collusion between Robinhood and large hedge funds that were losing money? Well, there is a class-action lawsuit already filed against Robinhood. Rest only time will tell.

Crux of the Matter

Gamestop Is Only The Beginning

  • After inflating GameStop’s price, the Reddit forum r/wallstreetbets started talking about buying stocks like Nokia, BlackBerry, AMC Entertainment, Koss Corp, etc in which hedge funds have significant short positions.
  • These stocks have also seen a jump in their prices.

Robinhood Of The Rich

  • After the massive rise in the price of GameStop, BlackBerry, Nokia, etc, hedge funds started to lose large amounts of money, with rumours of some even going bankrupt.
  • Unsurprisingly, free-trading pioneers like Robinhood, Interactive Brokers, and others like WeBull, M1, Public, did not allow trading in GameStop like stocks being targeted by the Reddit forum.
  • Robinhood halted buying of the GameStop stock but allowed selling it. This has infuriated traders and even Senators are calling out Robinhood’s hypocrisy.
  • Some have accused Robinhood of colluding with the hedge funds.
  • During Robinhood’s rise in the pandemic, many speculated that it earned money by selling trade orders to large brokers.
  • Some Robinhood users have filed a class-action lawsuit against Robinhood.

It is one of these rare events where the Wall Street guys have lost in their own game and how – simply via a social media platform! But it seems like they are rising once again and some speculate the large funds’ rise to be on the wrong side of the law. Well, as absurd as it may sound it is astonishingly true!  

Curiopedia
  • Reddit was founded by University of Virginia roommates Steve Huffman and Alexis Ohanian, and Aaron Swartz in 2005. As of 2018, there were ~330 million Reddit users, called “redditors”.
  • Robinhood was founded in April 2013 by Vladimir Tenev and Baiju Bhatt. As of 2020, Robinhood had 13 million users.
  • Wall Street’s name refers to a long-gone wall that was erected in the 17th Century by Dutch settlers intent on keeping out the British and pirates. The physical location of Wall Street is in lower Manhattan, where the New York Stock Exchange is housed.