Elon Musk Tweets About GameStop and Etsy, Their Stocks Surge

Shares in Etsy and GameStop surged this week after Tesla boss Elon Musk tweeted about the companies. Musk's GameStop tweet added to an ongoing siege against Wall Street by a community on Reddit that appeared to be costing corporate hedge funds both power and profit.

Trading was volatile this week as investors from the Reddit community r/wallstreetbets poured funds into video game retailer GameStop (GME), sending shares soaring by over 400 percent in seven days—and resulting in disruption of short sellers.

Amid this turmoil on Tuesday, Musk, who is no stranger to shifting markets using social media, tweeted "I kinda love Etsy," referencing a site best known for selling handmade items and art supplies. He said he bought a product for his pet dog.

I kinda love Etsy

— Elon Musk (@elonmusk) January 26, 2021

Musk did not give financial advice or reference r/wallstreetbets in his tweet, but his mere mention of the company appeared to align with Etsy shares rising by around 9 percent in premarket trading Tuesday, before it eventually reversed those gains in the afternoon.

Later in the day, however, GameStop stock surged by around 50 percent in extended trading as Musk shared a link to the Reddit group with the caption "Gamestonk!!" The term "stonks" is another term for stocks that often appears in online memes.

Gamestonk!! https://t.co/RZtkDzAewJ

— Elon Musk (@elonmusk) January 26, 2021

R/wallstreetbets, with the motto "Like 4chan found a Bloomberg Terminal," was a hive of activity this week as traders discussed how to game the system, saying firms popular with short sellers, such as BlackBerry or AMC, could be their next opportunity.

GameStop is perceived as a business in decline as the gaming world embraces digital, and has long been a target of these hedge fund short sellers—those who bet against the market and need GameStop stock to plunge for their investments to pay off.

After the founder of a short-focused analysis company called Citron Research claimed GameStop's share price would drop to $20, users of the Reddit community decided to attempt to force the price to rise by pouring investments into the company.

As one Reddit user explained in a post Wednesday morning: "If the shares are being held, and not sold, they are unavailable to be returned to brokerages.

"This drives the price up even more as the short investors scramble to buy whatever shares are available to fill their debt before the price continues to rise.

"Eventually someone is left holding the shares purchased at the highest possible price, but in this... case it probably won't be someone with a net worth under $100 million."

According to Buzzfeed News, GameStop stock price was at $230 in after-hours trading on Tuesday, compared to a stock price of around $4 just one year ago.

Analysis by S3 Partners, a financial technology company, said GameStop short sellers were already down by more than $5 billion in 2021. It said: "GME shorts and longs are in a knockout battle being waged in the stock market as well as social media."

The disruption this week is multifaceted, but partially aided by the availability of stock data, free trading apps and an overall low barrier to entry. Browsing r/wallstreetbets, which now has more than 2 million users, there's also an element of trolling.

It remains unclear if the trading is in violation of any U.S. laws or regulations. The U.S. Securities and Exchange Commission (SEC) has been contacted for comment.

John Patrick Lee, ETF manager at investment management firm VanEck, told Reuters he doesn't believe the GameStop rally is just a fad, but instead shows a "generational shift" in how people perceive markets and are willing to use their funds.

"A retail trader [a term for those who trade with their personal wealth] will not lean on Wall Street to manage their money and I definitely now see an antagonistic relationship between the old guard and individual traders who are on the rise," he said.

In one r/wallstreetbets post on Tuesday, a user explained the importance of the GME rally, saying it was "a tug of war between tradition and the future."

They said: "Hedge fund managers live in the past, and continue to look down upon the retail investors. They truly believe that we the average retail investors [are] just gambling our money away. This is the world they want to live in. This was the past.

"They're scared of the future. They're scared because, so much information is available for free now. There's no more fees for trading.

"We have large communities that discuss stocks and trading openly. We can think and make decisions for ourselves, which scares the f*** out of old school institutions."

SpaceX owner and Tesla CEO Elon Musk
SpaceX owner and Tesla CEO Elon Musk pictured in Berlin, on December 1, 2020. Shares in Etsy and Gamestop surged this week after Musk waded into an ongoing feud between Wall Street and a community on Reddit. BRITTA PEDERSEN/POOL/AFP/Getty

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