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GameStop investors who bet big and lose big

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Salvador Vergara was so excited to

GameStop Corp.

GME 10.00%

at the end of January that he took out a personal loan of $ 20,000 and used it to buy stocks. Then the buzzy stock plunged nearly 80%.

GameStop’s volatile run is hitting the portfolios of individual investors like Mr Vergara who bought the stock in a social media-fueled frenzy. These casual traders say GameStop was their “YOLO” or “you only live once” business. They bought around its peak in late January, betting it would continue its astronomical rise. While some cashed in before it crashed, others who have clung to their actions are in the red.

“I thought it could go up to $ 1,000. I really believed in this hype, which was a terrible thing to do, ”Vergara said.


Photo:

Farrah Skeiky for The Wall Street Journal

Mr. Vergara, a 25-year-old security guard in Virginia, started investing four years ago after deciding he wanted to retire young. To save money, he drives a 1998 Honda Civic, eats a lot of rice, and lives with his father. He hid his savings primarily in diversified index funds, which are now valued at around $ 50,000. Then Mr. Vergara, a longtime reader of the WallStreetBets page on Reddit, saw others post about buying GameStop stock and the stock’s colossal rise.

He didn’t want to touch his investments in index funds, so instead he got a personal loan with an 11.19% interest rate from a credit union and used it to fund most of the money. his GameStop purchase. He bought shares at $ 234 each.

Price feedback, year to date, 30 minute intervals

Source: FactSet

GameStop shares started the year around $ 19, hit nearly $ 350 (and nearly hit $ 500 in intraday trading) in late January, then started to fall back to earth. Shares closed at $ 52.40 on Friday, down 85% from the peak close.

“I thought it could go up to $ 1,000. I really believed in this hype, which was a terrible thing to do, ”Vergara said.

He plans to keep the shares because he believes in the turnaround of the business, he said, and to use his paycheck to cover the monthly personal loan payments. Once the pandemic is over, he hopes to return to his native Philippines, live off his savings and start a charity. The loss of GameStop delayed those plans by about six months, he said.

One of the works of Tony Moy, whose GameStop action bet has lost much of its value, is inspired by ‘diamond hands’, a phrase used to describe maintaining your position no matter what. come.


Photo:

Matt Moy

Free trading and easy-to-use apps have made it much easier for regular investors to invest money in stocks like GameStop. In a world without international travel, live shows, and other usual pastimes, brokerage apps such as Robinhood Markets Inc. attract hordes of new users looking for a diversion and a jackpot.

Before the pandemic, Patrick Wesolowski checked his wallet once a week. Then the clients of his Chicago-area dog walking business stopped taking vacations and started working from home, slashing his income and leaving him plenty of free time.

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With business slowing down, the 31-year-old began spending more time researching stocks to include in his $ 15,000 portfolio. He “hid” on WallStreetBets, reading the wild bets of other investors but not posting much himself. “It’s like reading the ‘Florida Man’ news headlines with a Wall Street twist,” he said.

Over the past few months, Mr. Wesolowski has found himself picking up his smartphone to check his Fidelity Investments brokerage account balance more often. He followed the frenzy around GameStop and, when stocks approached $ 300, decided to invest $ 3,000. After that, he checked his wallet on his phone every 10 minutes. At first, seeing the stock decline made him sick to his stomach, but then he got used to it.

“If I lose it, I lose it. I’m fine. It’s like going to Vegas, ”Mr. Wesolowski said. If he still had that money, he said, he might have spent it on some personal madness like a vacation.

Patrick Wesolowski spent more time researching stocks after the pandemic hit his dog walking business and bought $ 3,000 of GameStop stock.


Photo:

Ola Wazny

For many, GameStop was more than just an investment. When Tony Moy bought about $ 1,200 in stocks, two at $ 379 and two more a few days later at $ 228, “I knew that was, inherently, the wrong move,” he said.

Mr. Moy was not surprised when the stock quickly lost much of its value. An occasional WallStreetBets reader, he was mostly enthusiastic about keeping hedge funds with losses. Some hedge funds that sold the stock short (betting the price would drop)suffered great losses, although others managed to earn money during the turmoil.

Trade has been an outlet for Mr Moy’s frustrations after an abysmal year, a sort of “virtual protest,” he said. In 2020, after large gatherings were closed by the pandemic, the Chicago-based artist lost most of his income selling his work at comic book conventions. He also had a bad case of Covid-19 which left him coughing for months. He said his more successful investing efforts helped him get away with it financially.

One of Mr. Moy’s more recent works of art is inspired by “diamond hands,” a phrase used on Reddit to describe maintaining your position no matter what. He keeps his GameStop actions as a souvenir. “It’s going to remind me a little bit,” he said, “of how 2020 was the year hedge funds had a great year and everyone was struggling.”

The recent rise of GameStop and other stocks has involved investors on opposing camps: traditional Wall Street businesses and small investors against the system. The WSJ asked everyone the same questions about WallStreetBets’ role in the trading frenzy. Photo illustration: Carlos Waters

Write to Rachel Louise Teaches at [email protected]

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