Dumb Money really does show how the little guys won against Wall Street – a 'meme stock mania' expert explains
- Written by Larisa Yarovaya, Deputy Head of the Centre for Digital Finance, Associate Professor in Finance, University of Southampton
Drawing inspiration from the real-life 1,800% spike in the value of GameStop shares[1] in 2021, Dumb Money deftly explains the drivers of “meme stock mania” – when groups of investors on social media herd together to cause certain stocks to rocket.
The “dumb money” of the film’s title is a reference to these amateur or retail investors. At the height of the meme stock craze, these “little guys” worked together to upend the tactics of global hedge fund giants, which were using their billions to short-sell stocks. This is when investors try to drive down the value of a company’s shares because they’ve essentially bet against it rising in price.
Retail investors, by purchasing and holding shares of US computer game shop GameStop[2], drove the price up from approximately $19 (£15.50) at the beginning of January 2021 to $325 (£265) per share[3] by the end of the month. While the little guys profited[4], this contributed to losses nearing $25bn[5] for the hedge funds and other “big guys” who had been shorting these stocks.
Read more: GameStop: I'm one of the WallStreetBets 'degenerates' – here's why retail trading craze is just getting started[6]
For any viewers worried about having little knowledge or interest in retail investing, this comedy manages to explain the rise of GameStop shares – and meme stock mania – without overwhelming or complex financial jargon. And you don’t have to watch Margot Robbie explain everything from a bubble bath either, a tactic The Big Short[7] (2015) previously employed.
Yet Dumb Money still captures the intricacies of the investment chatter or “sentiment” that drove GameStop shares “to the Moon[8]” (as Reddit users said at the time). It does this by telling multiple parallel stories of members of the army of retail investors who held GameStop stock at the time. This helps show how their interactions on investment forums like the WallStreetBets[9] subreddit were behind the stock’s rally.
Throughout, Dumb Money uses realistic language of meme stock investors. I know this because my colleagues and I analysed 10.8m Reddit comments[10] to confirm the platform’s influence over meme stock share prices. In particular, we looked at the language that real-life Reddit investors use. Dumb Money effectively captures their distinctive, often offensive tone.
Frequently used words by retail investors on Reddit forums:
