The Crazy World of Stonks Explained
View the full-size version of this infographic here
You may have seen diamond hands, rockets, and r/wallstreetbets rallying cries in the past few weeks—but what does it all mean? In this graphic we explain the events that led to an explosive rise in GameStop’s share price, along with the Reddit revolution fueling it.
Gamestop’s stock has been on a wild roller coaster ride, rising by roughly 640% from the start of last week to its peak. After Robinhood and other brokers initializing trading restrictions due to the heightened market activity, the stock has since fallen more than 80% to $90 per share.
But the stock’s volatile price action doesn’t come close to telling the story of how this market frenzy began on the Reddit community r/wallstreetbets, the hedge funds that suffered when GameStop share price rose dramatically, and why Robinhood halted trading last week.
The Beginning of the GameStop Saga
While GameStop’s share price went higher than anyone expected this past week, the initial idea behind this rally was shared back in September 2019 by u/DeepFuckingValue, a frequent user in the r/wallstreetbets subreddit, a community where trade and investment ideas are shared.
The premise of his trade idea was simple: he saw unrecognized value and much more upside potential compared to the downside risk in GameStop.
While people were eager to proclaim the death of physical game sales, u/DeepFuckingValue noted the new generation of consoles on the horizon would bring gamers back to GameStop. Along with the company’s new board of directors and solid balance sheet, GameStop wasn’t as poorly positioned as many thought.
Among those betting against the company were a variety of hedge funds and other players who had an outstanding short interest against the stock. Just like the legendary investor Michael Burry proposed after him, u/DeepFuckingValue noted the possibility of a short squeeze if GameStop’s share price moved higher.
GameStop Rockets to the Moon
A collection of shorts had amassed on the game retailer’s stock, with hedge funds like Melvin Capital Management holding onto shorts for multiple years despite GME being at all-time lows. The r/wallstreetbets community caught onto this high short interest and wanted to “squeeze” them out of their positions.
In August and September of 2020, GameStop broke up from its lows around $4 a share, and returned 66% and 53% respectively, reaching new highs of $11 a share. Hedge funds piled in further as short interest on publicly traded shares reached 120%, yet GameStop’s uptrend continued, reaching more than $20 a share by the end of December.
Here’s what’s happened since:
|Date||GameStop (GME) Share Price||DeepFuckingValue's Unrealized Profits|
Sources: TradingView, /u/DeepFuckingValue’s Reddit posts
As GameStop’s price ran into the triple digits by the end of January, Melvin Capital was forced to close their short position despite a $2.75B investment from Citadel and Point72. At the same time, in just a few weeks, the number of r/wallstreetbets subscribers shot up from 1.8M to 8.3M.
Robinhood Halts Trading and Institutes Position Limits
On January 28th, when GameStop shares reached highs above $460, Robinhood and other brokers halted purchases of GameStop shares and options along with the ability to purchase fractional shares of securities. The broker had received a bill from the NSCC (National Securities Clearing Corporation) of $3B, reflective of the high volatility and value at risk on the platform.
In an informal interview with Elon Musk on Clubhouse, Robinhood CEO Vlad Tenev said that halting purchases and instituting position limits allowed the bill’s cost to ultimately drop to $700M. Before this interview, the company published a blog post of what happened on their end, along with an explainer of how trades are settled with clearinghouses.
While position limits which limited the amount of shares and options users could buy had originally been placed on 51 different securities, today only five have position limits. These include r/wallstreetbets favorites like GameStop (GME), AMC Entertainment (AMC), and Nokia (NOK).
Robinhood’s New Position Limits
You can see the latest position limits on Robinhood’s platform here.
Along with these position limits, Robinhood has instated further limitations related to pattern day traders. This limits users with less than $25,000 in their account to fewer than four trades over five business days.
r/wallstreetbets Discovers Dogecoin and Eyes Silver Shorts
As buying was halted for many of the preferred r/wallstreetbets stocks, the community shifted its attention to the cryptocurrency Dogecoin. Prior to the 28th, Dogecoin had been trading for $0.007 a coin, but in less than 24 hours the coin rose 1,000% to a high of $0.086.
Following this, the meme-based cryptocurrency has since levelled off around $0.033, which is still nearly a 350% return for anyone who had bought before the 28th.
Since their foray into cryptocurrency, some r/wallstreetbets users have now identified silver as a new opportunity with short squeeze potential. Since the 28th, silver has risen about 5%. Increased volumes for various silver brokers caused delays or resulted in the suspension of silver purchases over the weekend.
Despite the rally and growing excitement around the precious metal, there are those in the r/wallstreetbets community who consider this a distraction. Malicious players with a short interest in GameStop may be trying to draw attention away from the GameStop short squeeze.
What’s Next for Robinhood and r/wallstreetbets?
Since these unprecedented market events, Robinhood raised $3.4B in an investment round to further support their goal of “expanding everyday investors’ ability to invest”. Yet the company faces dozens of lawsuits for their halting of share purchases on the 28th of January, and will likely have to put its IPO on the backburner.
Their decision to halt purchases ultimately removed large amounts of buy pressure from GameStop and other securities, and its newly instated position limits and pattern day trader rule have driven many users away from the platform.
With their actions, Robinhood unwittingly spurred a deep divide between Main Street and Wall Street. Many r/wallstreetbets members now feel their trades and investments carry an idealistic importance worth more than potential profits or losses.
While there is still plenty of this story left to play out, last week saw an irreversible change in how many individual investors perceive the market, its participants, and its rules. While new rules and regulations will change shape going forward, one thing is clear: the rise of information sharing has changed how financial markets will be traded forever.
Mapped: GDP per Capita Worldwide
GDP per capita is one of the best measures of a country’s standard of living. This map showcases the GDP per capita in every country globally.
Mapped: Visualizing GDP per Capita Worldwide
View the high-resolution of the infographic by clicking here.
GDP per capita has steadily risen globally over time, and in tandem, the standard of living worldwide has increased immensely.
This map using data from the IMF shows the GDP per capita (nominal) of nearly every country and territory in the world.
GDP per capita is one of the best measures of a country’s wealth as it provides an understanding of how each country’s citizens live on average, showing a representation of the quantity of goods and services created per person.
The Standard of Living Over Time
Looking at history, our standard of living has increased drastically. According to Our World in Data, from 1820 to 2018, the average global GDP per capita increased by almost 15x.
Literacy rates, access to vaccines, and basic education have also improved our quality of life, while things like child mortality rates and poverty have all decreased.
For example, in 1990, 1.9 billion people lived in extreme poverty, which was 36% of the world’s population at the time. Over the last 30 years, the number has been steadily decreasing — by 2030, an estimated 479 million people will be living in extreme poverty, which according to UN population estimates, will represent only 6% of the population.
That said, economic inequality between different regions is still prevalent. In fact, the richest country today (in terms of nominal GDP per capita), Luxembourg, is over 471x more wealthy than the poorest, Burundi.
Here’s a look at the 10 countries with the highest GDP per capita in 2021:
However, not all citizens in Luxembourg are extremely wealthy. In fact:
- 29% of people spend over 40% of their income on housing costs
- 31% would be at risk of falling into poverty if they had to forgo 3 months of income
The cost of living is expensive in Luxembourg — but the standard of living in terms of goods and services produced is the highest in the world. Additionally, only 4% of the population reports low life satisfaction.
Emerging Economies and Developing Countries
Although we have never lived in a more prosperous period, and poverty rates have been declining overall, this year global extreme poverty rose for the first time in over two decades.
About 120 million additional people are living in poverty as a result of the pandemic, with the total expected to rise to about 150 million by the end of 2021.
Many of the poorest countries in the world are also considered Least Developed Countries (LDCs) by the UN. In these countries, more than 75% of the population live below the poverty line.
Here’s a look at the 10 countries with the lowest GDP per capita:
Life in these countries offers a stark contrast compared to the top 10. Here’s a glance at the quality of life in the poorest country, Burundi:
- 80% of the population works in agriculture
- 1 in 3 Burundians are in need of urgent humanitarian assistance
- Average households spend up to two-thirds of their income on food
However, many of the world’s poorest countries can also be classified as emerging markets with immense economic potential in the future.
In fact, China has seen the opportunity in emerging economies. Their confidence in these regions is best exemplified in the Belt and Road initiative which has funneled massive investments into infrastructure projects across multiple African countries.
Continually Raising the Bar
Prosperity is a very recent reality only characterizing the last couple hundred years. In pre-modern societies, the average person was living in conditions that would be considered extreme poverty by today’s standards.
Overall, the standard of living for everyone today is immensely improved compared to even recent history, and some countries will be experiencing rapid economic growth in the future.
GDP per Capita in 2021: Full Dataset
|Country||GDP per Capita (Nominal, 2021, USD)|
|🇺🇸 United States||$66,144|
|Hong Kong SAR||$47,990|
|United Arab Emirates||$32,686|
|Taiwan Province of China||$28,890|
|Trinidad and Tobago||$16,622|
|Saint Kitts and Nevis||$16,491|
|Antigua and Barbuda||$14,748|
|Saint Vincent and the Grenadines||$7,401|
|Bosnia and Herzegovina||$6,536|
|West Bank and Gaza||$3,060|
|Papua New Guinea||$2,596|
|Congo, Republic of||$2,271|
|São Tomé and Príncipe||$2,133|
|Central African Republic||$522|
|Congo, Dem. Rep. of the||$478|
|South Sudan, Republic of||$323|
Editor’s note: Readers have rightly pointed out that Monaco is one of the world’s richest countries in GDP per capita (nominal) terms. This is true, but the IMF dataset excludes Monaco and lists it as “No data” each year. As a result, it is excluded from the visualization(s) above.
Ranked: The Most Innovative Companies in 2021
In today’s fast-paced market, companies have to be innovative constantly. Here’s a look at the top 50 most innovative companies in 2021.
Ranked: the Top 50 Most Innovative Companies in 2021
This year has been rife with pandemic-induced changes that have shifted corporate priorities—and yet, innovation has remained a top concern among corporations worldwide.
Using data from the annual ranking done by Boston Consulting Group (BCG) using a poll of 1,600 global innovation professionals, this graphic ranks the top 50 most innovative companies in 2021.
We’ll dig into a few of the leading companies, along with their innovative practices, below.
Most Innovative Companies: A Breakdown of the Leaderboard
To create the top 50 innovative company ranking, BCG uses four variables:
- Global “Mindshare”: The number of votes from all innovation executives.
- Industry Peer Review: The number of votes from executives in a company’s industry.
- Industry Disruption: A diversity index to measure votes across industries.
- Value Creation: Total share return.
For the second year in a row, Apple claims the top spot on this list. Here’s a look at the full ranking for 2021:
|Company||Industry||HQ||Change from 2020|
|3||Amazon||Consumer Goods||🇺🇸 U.S.||--|
|5||Tesla||Transport & Energy||🇺🇸 U.S.||+6|
|6||Samsung||Technology||🇰🇷 South Korea||-1|
|9||Sony||Consumer Goods||🇯🇵 Japan||--|
|12||LG Electronics||Consumer Goods||🇰🇷 South Korea||+6|
|14||Alibaba||Consumer Goods||🇨🇳 China||-7|
|17||Cisco Systems||Technology||🇺🇸 U.S.||-5|
|18||Target||Consumer Goods||🇺🇸 U.S.||+4|
|19||HP Inc.||Technology||🇺🇸 U.S.||-4|
|20||Johnson & Johnson||Healthcare||🇺🇸 U.S.||+6|
|21||Toyota||Transport & Energy||🇯🇵 Japan||+20|
|23||Walmart||Consumer Goods||🇺🇸 U.S.||-10|
|24||Nike||Consumer Goods||🇺🇸 U.S.||-8|
|25||Lenovo||Technology||🇭🇰 Hong Kong SAR||Return|
|26||Tencent||Consumer Goods||🇨🇳 China||-12|
|27||Procter & Gamble||Consumer Goods||🇺🇸 U.S.||+12|
|28||Coca-Cola||Consumer Goods||🇺🇸 U.S.||+20|
|29||Abbott Labs||Healthcare||🇺🇸 U.S.||New|
|30||Bosch||Transport & Energy||🇩🇪 Germany||+3|
|32||Ikea||Consumer Goods||🇳🇱 Netherlands||Return|
|33||Fast Retailing||Consumer Goods||🇯🇵 Japan||Return|
|34||Adidas||Consumer Goods||🇩🇪 Germany||Return|
|35||Merck & Co.||Healthcare||🇺🇸 U.S.||Return|
|37||Ebay||Consumer Goods||🇺🇸 U.S.||Return|
|38||PepsiCo||Consumer Goods||🇺🇸 U.S.||Return|
|39||Hyundai||Transport & Energy||🇰🇷 South Korea||Return|
|41||Inditex||Consumer Goods||🇪🇸 Spain||Return|
|44||Disney||Media & Telecomms||🇺🇸 U.S.||Return|
|45||Mitsubishi||Transport & Energy||🇯🇵 Japan||New|
|46||Comcast||Media & Telecomms||🇺🇸 U.S.||New|
|47||GE||Transport & Energy||🇺🇸 U.S.||Return|
One company worth touching on is Pfizer, a returnee from previous years that ranked 10th in this year’s ranking. It’s no surprise that Pfizer made the list, considering its instrumental role in the fight against COVID-19. In partnership with BioNTech, Pfizer produced a COVID-19 vaccine in less than a year. This is impressive considering that, historically, vaccine development could take up to a decade to complete.
Pfizer is just one of four COVID-19 vaccine producers to appear on the list this year—Moderna, Johnson & Johnson, and AstraZeneca also made the cut.
Meanwhile, in a completely different industry, Toyota snagged the 21st spot on this year’s list, up 20 places compared to the rankings in the previous year. This massive jump can be signified by the company’s recent $400 million investment into a company set to build flying electric cars.
While we often think of R&D and innovation as being synonymous, the former is just one innovation technique that’s helped companies earn a spot on the list. Other companies have innovated in different ways, like streamlining processes to increase efficiency.
For instance, in 2021, Coca-Cola performed an analysis of their beverage portfolio and ended up cutting their brand list in half, from 400 to 200 global brands. This ability to pare down and pivot could be a reason behind its 20 rank increase from 2020.
Innovation Creates Value
As this year’s ranking indicates, innovation comes in many forms. But, while there’s no one-size-fits-all approach, there is one fairly consistent innovation trend—the link between innovation and value.
In fact, according to historical data from BCG, the correlation between value and innovation has grown even stronger over the last two decades.
For example, in 2020, a portfolio that was theoretically invested in BCG’s most innovative companies would have performed 17% better than the MSCI World Index—which wasn’t the case back in 2005.
And yet, despite innovation’s value, many companies can’t reap the benefits that innovation offers because they aren’t ready to scale their innovative practices.
The Innovation Readiness Gap
BCG uses several metrics to gauge a company’s “innovation readiness,” such as the strength of its talent and culture, its organization ecosystems, and its ability to track performance.
According to BCG’s analysis, only 20% of companies surveyed were ready to scale on innovation.
What’s holding companies back from reaching their innovation potential? The most significant gap seems to be in what BCG calls innovation practices—things like project management or the ability to execute an idea that’s both efficient and consistent with an overarching strategy.
To overcome this obstacle, BCG says companies need to foster a “one-team mentality” to increase interdepartmental collaboration and align team incentives, so everyone is working towards the same goal.
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