Meme stock frenzy was the crazy story that 'didn’t beat Wall Street': WSJ editor

Wall Street Journal Editor and Columnist Spencer Jakab joins Yahoo Finance Live to discuss the meme stock phenomenon on Wall Street one year ago and where it stands today.

Video transcript

JULIE HYMAN: You know, as we see all this selling today, we look back to one year ago. And that's really when the meme stock mania heated up. There is GameStop from last January going, really, through March. On January 28, the stock traded as low as around $112 and as high as-- what, $438, I believe, is the number, the low and the high on that single session as we saw all of that craziness go on. Of course, we've seen the likes of GameStop and AMC sell off sharply along with a lot of the other risk assets over the past several months.

Spencer Jakab wrote a book about all of this looking into the meme stock mania, what was driving it, who really came out on top. He is joining us now. He's also editor of "The Wall Street Journal" "Heard on the Street" column. "The Revolution That Wasn't" is the title of the book-- "GameStop, Reddit, and the Fleecing of Small Investors." Spencer, we're looking at the selloff that we have seen in these stocks now, but there were people who made money, obviously, at the time with the big increase that we're seeing. Now that we have this year between then and now, what are some of the takeaways?

SPENCER JAKAB: It's hard to imagine that it's been a year. A year ago, GameStop was this failing video game retailer. AMC was a theater chain that was months away from going bust. Blackberry was this company that used to make your smartphone, and then they became these weapons that were used against Wall Street.

And the narrative at the time was they took these-- they took the shares and options in these stocks, and they blew multibillion-dollar holes in big Wall Street hedge funds and that they had outsmarted Wall Street. And very temporarily, they did. And it's a crazy story. It's crazier even than you remember. And I tell it. I go back to the origins of the story, and it's fascinating.

But they didn't beat Wall Street. I mean, that's basically my take. And that's why I call it the revolution that wasn't. Because in terms of-- Wall Street's a big place, and Wall Street likes it when people get very excited about beating Wall Street and plow a lot of money into it. And a lot of people, corporate executives too, got really rich off of this. And not that many people who participated as retail investors made money. Some did, of course. People made money on pets.com. People make money on everything. But a lot of people didn't do well.

BRIAN SOZZI: Spencer, what interests me and what I find fascinating is there's still this hardened group of meme stock investors who just love the likes of games GameStop. They love AMC even though they're probably sitting on losses. Is that surprising to you, just their loyalty to these stocks?

SPENCER JAKAB: It's completely surprising to me how much it still remained a story. I guess as somebody who spent the last year writing a book about it that comes out in a week, I'm happy that it's still very much a story and it's still very much a punching bag. But look, it's like one of those predictions that the world is going to end. And that's what you've seen on these message boards. There's going to be this huge mother of all short squeezes. It's going to bankrupt Wall Street, and we're going to make a lot of money. And it keeps not happening because it won't happen, because it's predicated on numbers that don't really add up.

And you've had people charge at it again and again. It's like you're waiting for lightning to strike a second and third and fourth and fifth time. And the conditions that happened a year ago just are not going to repeat themselves. Of course, if lots of people rush in and buy a stock, it's going to go up for a little while. But Wall Street's not going to get caught sleeping again.

JULIE HYMAN: And "The Wall Street Journal" itself published a story this week looking at the big drop in posts on Wall Street Bets and that basically, they're just beating the AMC and GameStop horses over and over again. In writing this, did you get any insight as to what the next phase of retail revolution-- or if it's not a revolution, at least retail involvement in the market-- is going to look like?

SPENCER JAKAB: I see it as morphing. And I see that the people who got involved in this-- and that's really who I'm concerned about, are the people who got involved in this, young people who opened accounts. More than 10 million people opened brokerage accounts over the course of my story. I see some of them continuing to speculate but maybe finding other things that are more exciting like cryptocurrencies. There's already been a lot of morphing into that.

And a lot of those people kind of got hooked on the adrenaline rush of the whole thing. I see people also feeling very bitter about Wall Street, probably not without reason, and just saying this is not for me. And that's going to cost them a lot of money. Because if you don't participate in Wall Street-- if you're a 20 or 25-year-old, and for the next 40 years, you don't save money, don't put money in a 401(k) because you see Wall Street is crooked, that's going to cost you a ton of money compounded over the years.

And then some small minority, but I hope not that small, will say, hey, I learned my lesson. This wasn't that smart. And getting advice from random people on Reddit was not that smart. And I'm going to-- slow and steady wins the race, and I'm going to save for my future now that I have an account open. So I hope that that group is not that small, but that's really who I'm speaking to when I write my columns for "The Wall Street Journal."

BRIAN SOZZI: A lot of big names on Wall Street, Spencer, lost a lot of money during this frenzy. How are they feeling right now?

SPENCER JAKAB: Well, they felt pretty stupid at the time. And if you look back, everything's obvious in hindsight. You look at what was going on. I go back several months before the events and look at what was going on on the message boards, and it was spelled out. So there were some sophisticated people on these boards who said we're going to create a short squeeze. This is how you do it. These are the options you need to buy to have the maximum bang for the buck. These are the people who are most exposed.

And so people like Gabe Plotkin, whose Melvin Capital lost $6 billion-- and he certainly wasn't the only one to take big losses-- it's just a case of hubris. They weren't reading these message boards, or if they were, they weren't taking them seriously. And they never imagined that this could happen. This was something that was completely beyond-- if you're short a stock and then some other company comes in and buys it or the company cures cancer or whatever, then you're going to lose money, and you're going to lick your wounds, because that's what happens. But you never imagine a stock going from $2.17 to $483 because a bunch of people got excited about it on a message board and nothing fundamentally changed with the company. So that was something they just didn't see coming, but they're prepared today.

JULIE HYMAN: Well, in the meantime, perhaps the apes should pick up the book and figure out maybe what they should be doing differently or not doing differently going forward. Spencer Jakab, "Heard on the Street" column editor and columnist and author of "The Revolution That Wasn't." Thanks so much. Appreciate it.