Meet & Glean: The teenage big-profit-makers in South Africa’s Reddit Army

Reports have it that a small number of South Africans are part of the Reddit army that is marching on Wall Street hedge funds, in the most unprecedented market battle in recent history.

Among these South African members of the Reddit army is a group of Cape Town teenagers, who have seen incredible gains – on paper – thanks to early investments in GameStop.

This group of teenagers, while bored and unable to attend school last year due to the pandemic-induced lockdown, started exploring the world of investments.

“We were looking for investment ideas, and then came across the WallStreetBets discussion group on Reddit,” an eighteen-year old member of the group from Milnerton, said.

And so they started reading about US retailer GameStop, which was a favourite among short-selling hedge funds. These funds were taking massive bets that GameStop’s share price would fall.

Reddit users came up with an audacious plan to take on these short-sellers: they would buy GameStop, and drive up its share price. This would be pure poison for large short-sellers, who suddenly had to buy back much pricier shares to cover their positions.

Using money he earned as a lifeguard over weekends, the teenager and his friends each bought a few thousand rands’ worth of GameStop shares in October, via the UK trading platform eToro.

Most of them actively traded the shares, selling their holdings and buying back over time as GameStop started to climb. When the share hit $60 a share, the 18-year-old started buying “seriously”.

But one of the friends kept his initial position throughout. He invested $500 in GameStop in October last year, when its share price was still $12. Given that GameStop is now trading around $225, his initial R7,000 investment is now worth more than R130,000.

Still, none of the friends are selling.

“We are waiting for GameStop to hit $3,000,” one member of the group said.

After the popular trading platform, Robinhood started to restrict trading in the share last week, they now expect that a shortage of available GameStop shares in the market will trigger an exponential rally.

The friends are betting that hedge funds – which must buy GameStop shares to cover their short positions – will become increasingly desperate to get hold of the share, triggering a so-called “short squeeze”.

While the world of investment is a tricky one to meddle in without proper education, as exemplified by this group of teenagers who first of all read up all that they could concerning the GameStop shares before investing in them, the overriding lesson to be learnt from these teenagers who now are on their way to long-term financial freedom is this: sow your little seeds in new fertile farms. i.e. learn about the legal money wells of the future and invest in the future, as much as you can conveniently afford.

We also learn from these teenagers to put the spare time in our hands to productive use, just as they did, by taking up paying jobs during the lockdown period even though they could have afforded to sit at home idly. It was the money they made from these jobs that they used to make those investments in GameStop shares which is today transforming their financial future.