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Mintel and Comperemedia analysts break down the shorting of the GameStop stock: What happened, who the consumer groups involved are, and what it means from a brand perspective.

Brian Benway, Comperemedia Research Analyst

What happened?

Gamestop Corp (GME) was trading around $4 at the beginning of 2020, and was hard struck by the pandemic. They had closed 462 stores in 2020, and 783 over the last two years. The gaming retailer resisted shutdown mandates, insisted they were “essential” and struggled to maintain cleanliness standards in stores. By all accounts, Gamestop was not doing well from a business standpoint and was surrounded by bad press and negative sentiment. On October 20, 2020, Gamestop announced a multi-year strategic partnership with Microsoft (MSFT $240) to enhance the retail technology infrastructure of GME, but the fruits of that signed deal have yet to play out.

For many consumers affected by the pandemic, the situation took on incredible personal significance. Stories were shared on Reddit of the hardships during previous recessions, and comparisons were made to the occupy Wall Street movement. The significance that many individuals were trading on a platform named Robinhood was lost on no one. The inequality of the situation took on more significance as the stock price continued to go up, while the institutional investors attempted to shout it down on mainstream media. Word of mouth and the population of Reddit group ‘r/Wallstreetbets’ doubled almost overnight, to 4.7M Redditors and counting, and the stock price of GME continued to soar.

What happened with the stock’s value caused by trading loopholes in allowing the stock to be short sold over 100%. Individuals noticed that some trading firms on Wall Street were trying to force GME’s stock price down through that excessive short selling, and over the course of a year, had built up grassroots support from other individual investors to trap the hedge funds into their position, which caused the stock to go into an upward spiral.

Jeannette Ornelas,  Comperemedia Senior Digital Marketing Analyst

Fallout from a brand perspective

This is not a simple PR crisis. For trading app Robinhood, it’s an identity crisis. With all eyes on the Gamestop short squeeze, Robinhood swiftly took actions that restrict trading on Gamestop and AMC. While this news on its own would be expected to elicit backlash from its user base, what further adds fuel to the fire is Robinhood’s own brand mission.

What Robinhood ultimately sells is accessibility, financial empowerment for everyone: “We are all investors. our time is now.” In 2020, Robinhood unveiled a new visual identity that better reflects their vision, “a more equitable world where everyone has the opportunity to build wealth.” That vision is now at odds with the actions it is taking today, and ultimately, how the brand is perceived on Main Street.

We know the demand for trading how-tos is growing and young traders are increasingly leveraging social media platforms to share trading tips and how-tos. This isn’t simply a Reddit board (r/wallstreetbets) phenomenon. TikTok videos under the #robinhoodstocks tag have generated 14 million views; videos under the #daytrading tag have generated over 99 million views. #HoldTheLine is currently trending on Twitter. Comperemedia 2021 Omnichannel Marketing Trend, “Fandom as Cultural Currency” explores how brands are leveraging fandom to gain access to and engage with rapidly growing communities. We expect brands across categories will tap into creator culture as a way to build awareness with younger, and new, customers.

The GameStop short squeeze further proves these trends can’t be ignored; these trends offer insight into how young people are entering the trading pool and ultimately, the platforms and tools that are filling a void in categories where education is a barrier to trial. Robinhood, WeBull, Reddit, Coinbase, and TikTok are currently in the top-five free apps in the iOS store. On January 28, Coinbase announced it is going public via direct listing.

Whether it’s on social media feeds or low-barrier apps, there is a consumer appetite for democratized, and increasingly, decentralized finance. Trust is a precious commodity, one that is in high demand and short supply.

John Poelking, Mintel Senior Gaming Analyst

What we think

The GameStop short squeeze is less of an indication of the strength of the gaming retail mainstay, and more of a note on the power of gaming culture and community. The r/wallstreetbets Redditors aren’t necessarily players, but they carry many of the same characteristics. Both gamers and these investors adamantly defend their passions and use a collective voice when they feel like they’re being taken advantage of. GameStop has been facing an identity crisis even before the pandemic, as it continued to lose customers to convenient online retailers. Corporate restructuring, a powerful partnership with Microsoft and a strong quarter capitalizing on the release of next-generation consoles have buoyed GameStop’s value. Still, the astronomical surge in value should primarily be attributed to a sea of amateur investors rather than any sort of change in company performance. It may be difficult for GameStop to ride this wave when the shorts have closed, but momentum and publicity surrounding the squeeze could help the retailer in the short term.