WallStreetBets turned memes into market history. Australian investment experts weigh in on whether it could happen here.

Ryan Pierse/Getty Images
  • Australian Reddit forum r/ASX_Bets celebrates fast-and-loose trades on the stock market, with 33,000 users memeing their profits — and losses.
  • The board is inspired by r/WallStreetbets, the American forum which recently orchestrated the miraculous rise of GameStop share prices.
  • One Australian expert believes local retail traders could emulate the same strategy here, but a major industry player is less convinced.
  • Visit Business Insider Australia’s homepage for more stories.

The global investment community has been dumbfounded by chaotic online message board r/WallStreetBets, whose users have memed US company GameStop’s share price into the stratosphere.

Drawn together by irreverence, an appetite for risk, and disdain for institutional investors, countless retail traders have turned GameStop shares into a blunt-force weapon against hedge funds.

On the other side of the world, an Australian forum emulates the same outsider spirit. Reddit board r/ASX_Bets has drawn 33,000 subscribers, who freely boast about their trades and losses on the Australian market.

In the fallout of r/WallStreetBet’s historic charge on the US market, one local expert believes Australian forums like r/ASX_Bets could serve as a catalyst for another “unprecedented” market play.

The managing director of an up-and-coming investment platform says otherwise — and the board itself may be more nuanced than its loosest traders let on.

To the Bunnings or the moon, whichever comes first

Reddit community r/ASX_Bets, where users try to recoup “lost super one Bunnings sausage at a time,” presents itself as a place where sensible investment strategies go to die.

Subscribers boast about trades executed with little to no research, ‘shitpost’ about their losses, and speak with reverent tones about the forum’s undisputed king: a young trader who accidentally purchased 5,000 shares of Australian buy now, pay later operator Zip, for the eye-watering sum of $36,500.

He turned a miraculous profit.

Amid all of the bullish posturing on penny stocks, a warning declares nothing included within should be given or interpreted as financial advice. Even that isn’t totally straightforward. “There ASIC, are you happy now,” it reads, referring to the regulatory body overseeing Australia’s financial sector.

Commenters are frequently irreverent, as are the trades defying conventional market logic. But local subscribers aren’t alone.

r/ASX_Bets moderators freely admit it is based on r/WallStreetBets, the no-holds-barred subreddit dedicated to high-risk options trading on the New York Stock Exchange – and, as of January 2021, a market-shattering run on a video game retailer’s stock.

Hold me, tendie

Drenched in irony and bro-speak, r/WallStreetBets gained mainstream notoriety over 2020 as American users showcased the vast sums they made – and lost – during extreme financial volatility.

But the board is now major news worldwide thanks to its coordinated charge against institutional investors – and, inadvertently, the market itself.

The story goes like this: users speculated that hedge funds held improbably huge short positions in GameStop, the flagging-not-failing video game retailer which also owns Australia’s EB Games franchise.

Redditors conspired to buy GameStop shares, with only cursory regard to GameStop’s fundamentals. The goal was to play the market by turning those hedge fund positions into big-time losers, thereby driving share prices even higher.

The gambit worked. As hedge funds scrambled to cover their positions, the share price skyrocketed. Shares which traded at $5 a share at the start of 2020 closed hit nearly $470 a pop on Thursday.

The chaotic market run saw hedge funds lose billions. Retail investment platform Robinhood temporarily postponed GameStop trades, citing dangerous volatility.

And incensed Redditors, who came to see the short squeeze as a backlash against institutional market manipulators, doubled down out of spite.

via r/WallStreetBets

Could those factors mobilise Australian retail investors? And how did the little guys even come to challenge the market in the first place?

The ‘corona generation’

Robert Francis, Australian managing director of investment platform eToro, has some ideas. He believes the evaporation of the Australian Dream – at least, the idea that employment leads to home ownership – is driving young Australians to retail investment.

“I think we’re at a stage now where we’ve got a generation of millennials that are coming into an environment where it’s very hard for them: a low interest rate environment, can’t see capital growth, wanting to buy their first home, not being able to do so unless they’ve got their parents’ help,” Francis told Business Insider Australia.

“And then finally thinking, ‘How else can I possibly get a deposit together in order to live the great Australian dream of owning that block of land?’ I think this is where investing in equities is as a part of play.”

With traditional pathways to financial security wipes off the map, Francis said young investors are instead backing themselves in the market.

The company’s own figures bear that out, with eToro recording a 480% growth in new Australian users over the year to November 2020.

And data provided by the firm suggests those new retail investors are entering the market with whatever assets they have: roughly 20% of survey respondents told the firm they believed $500 was enough to get started.

If years of stagnant wage growth and declining social mobility gave young Australians the urge to invest, the pandemic lent them the opportunity.

Angel Zhong, Senior Lecturer in Finance in at RMIT University, points to widespread shutdowns as a catalyst for retail investment. Her research even has a term for the latest batch of speculators: ‘the corona generation.’

Not all of them played it safe. Australia’s lockdowns generated a wave of speculators who “can’t even calculate recent return,’ Zhong said, with that cohort liable to take risky positions on the market.

“Due to COVID-19 restrictions, a lot of casinos were closed,” Zhong said. “So instead of gambling in casino or TAB, people use the stock market as an alternative to gamble.”

Zhong said that simple urge to punt has fed into the “large power of social retail trading.”

The Australian connection

While American Redditors feast on GameStop ‘tendies’ — r/WallStreetBets vernacular for ‘profit’ – some Australians on r/ASX_Bets echo the meme-laden posts which propelled GameStop to unreal highs.

Users have seized on the shares of Australian company Lake Resources, which last week revealed promising news about a new lithium extraction site, and on Monday confirmed a further $20.6 million in funding from institutional investors.

Share prices bounced from $0.16 to $0.40 in the space of a week, prompting some users to show off their paper profits.

At the same time, onlookers copied the ‘shitposts’ which served as the self-fulfilling prophecy behind GameStop’s remarkable run.

A few even tried their luck on GameStop shares themselves – and users celebrated when investors accidentally bought into an Australian company with the same stock ticker.

While r/ASX_Bets can serve as a jokey introduction to speculative investment ‘tips’, both Francis and Zhong warn Australian retail traders against blindly following advice shared online.

“You know, there’s no way just because I saw the guy next to me win ten grand, all of a sudden I’m gonna win big, big money,” Francis said, advising retail investors to look at the ‘long game’.

“Take an investment, add to that investment over a period of time,” he added.

“And you’ll see that if you put into a compound interest calculator, the return at the end is going to be significantly more than you taking a punt on something that may or may not turn out.”

Could GameStop happen here?

If they are united on the risks of trading, Francis and Zhong disagree on whether individual Australian retail investors could coordinate to stun the stock market.

Without specifically addressing GameStop, Francis said individual Australian traders broadly lack the appetite to pursue leveraged positions – a vital weapon in the r/WallStreetBets arsenal.

“I think that people will tread very carefully when it comes to options trading going forward,” he said.

Zhong is more open to the idea.

“I think it could still happen here,” she said, pointing to the impact of other Australian trading communities on the website HotCopper and private Facebook groups.

“With the rise of retail trading since 2020, and this GameStop scenario, it tells us that retail traders have become a driving force in the market that you can’t neglect.”

via r/ASX_Bets

Still, there is one limiting factors keeping r/ASX_Bets from launching a GameStop-style assault: r/ASX_Bets itself.

In response to the “minor business going on in the big daddy sub”, moderator u/The_lordofruin has announced three-month bans for any commenter “attempting to co-ordinate or organise any type of ‘market play'”.

They said Australian users angling for short-squeeze action are ignoring stocks which have been shorted, suggesting they’re just boosting share prices for themselves.

That’s a clear violation of the forum’s number one rule: You can ‘shitpost’, but you can’t stock pump.

“If a great crusade comes along, If someone kicks your dog or we find evidence of manipulation, we’ll grab our pickforks (sic) with you,” u/The_lordofruin said.

“But arranging a pump so someone else will hold your bags isn’t the same thing.”

Beyond the crackdown on would-be squeezers, many r/ASX_Bets users prefer to focus on the fundamentals of their preferred shares, instead of esoteric attacks on over-leveraged institutions.

Subscribers riding high on Lake Resources appear at least somewhat bullish about the growing role of lithium for electric vehicle production.

The same goes for long-term favourite Afterpay, which, like GameStop, has been memed – but not for its potential to be short-squeezed.

Instead, Australian day traders obsess over the buy now, pay later operator for its remarkable resilience through economic turmoil.

For all its ocker posturing, the forum remains relatively conservative next to r/WallStreetBets.

Besides, r/ASX_Bets would likely need to grow its user base before acting as a millions-strong day-trader army, dazed by leveraged positions and tweets from ‘Daddy’ Elon Musk.

Just as well, according to Francis.

“Everybody has to do that ‘day trading experience’, if you will,” he said.

“And what they’ll find out after hopefully a few months – not a few years – they’ll suddenly realise that they’ve made a big mistake.

“And this is not the way to build wealth.”

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