How GameStop became the perfect 'meme stock' for r/WallStreetBets

• The subreddit r/wallstreetbets drove up the price of GameStop shares and caused massive losses for hedge funds.
• The subreddit was created in 2012 and grew an "irreverent and sarcastic" subculture.
• The GameStop trading put the subreddit on the world's radar.

The world watched as Reddit users from r/wallstreetbets drove up the price of GameStop stock, causing Hedge Fund short sellers betting against the stock's value to lose more than $1 billion in just a day.

Read more: How hedge funds are tracking Reddit posts to protect their portfolios after the Wall Street Bets crowd helped tank Melvin Capital's short positions

While the climb from below $5 near the end of 2020 to over $500 at one point on Thursday may have taken the finance world by surprise, amateur investors in the subreddit knew something like this might happen. One Redditor has held GameStop stock since 2019, confident that it was undervalued, and now has become a legend as other users encourage each other to hold and watch it continue to climb.

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Here's how GameStop became the target of choice.

The WallStreetBets subreddit was started in 2012 by Jaime Rogozinski, a technology consultant at the time.

—TMZ (@TMZ) January 28, 2021

"When I created the sub, I was looking for a community, a place for people to talk about high-risk trades in an unapologetic way for people to make some short term money with disposable income," founder Rogozinski told TMZ. "The progression of WallStreeBets throughout the years has been nothing short of amazing."

The subreddit didn't take off immediately, and it took years to build up subscribers and a community.

The subreddit eventually developed a culture around boasting about lack of market knowledge and a desire to show up hedge fund managers.

The about section reads: "Like 4chan found a Bloomberg terminal illness," and displays 6.1 million "degenerates," or members.

Reddit user Keith Gill, known by the username "DeepF-ingValue" on r/WallStreetBets, led the charge in Redditors jumping into Gamestop trading, The Wall Street Journal reported.

"The subreddit culture, even from the beginning, was irreverent and sarcastic. The forum was a place for users to post their research and trade ideas, and also for other users to mock those ideas or the author personally," the subreddit's moderators told Insider in an email.

"The self-deprecating culture, the wild and ridiculous bets some users made, and the sometimes gigantic wins and losses that followed, attracted a lot more users than the more serious-minded forums," moderators said.

Gill started investing in GameStop in 2019 when shares were down to about $5, and he saw potential for the video game retailer to bounce back. "It was a gross misclassification of the opportunity," he told WSJ.

He also shared his "investment philosophy" through his YouTube channel, Roaring Kitty, which has 114,000 subscribers.

At the same time, a mod uprising took place on the subreddit, and founder Rogozinski was kicked out for "attempting to sell rights to the subreddit to a cut-rate trading team," according to messages posted on WallStreetBets Discord channel.

By the second half of 2020, "meme stocks," or investments that grow popular online though they don't make sense by usual metrics, were catching on in the subreddit, and a few users were claiming to make huge profits from Tesla.

As the stock price exploded this week, attention from the media, government, and finance industry was on r/WallStreetBets.

Gill became legendary within the subreddit, posting daily updates on the state of his Gamestop investment. In a post on January 28, his holding was worth nearly $14 million.

Moderators of r/WallStreetBets created an official Twitter account to speak for the subreddit. The account first tweeted on January 26.

On January 28, moderators made a post titled "Where do we go from here and who is going to step up to help us?"

The post explains how the subreddit and Discord have been overwhelmed with new users, while most commenters encouraged each other to "Hold GME and let's ride this rocket to the moon."