The GameStop trading frenzy in 2021 marked the reemergence of the retail investor in the securities markets. An unprecedented number of new and largely inexperienced investors opened app-based brokerage accounts and began trading so-called meme stocks issued by companies that included GameStop, AMC and Express. Interest in these stocks, which was fueled by postings on social media, led to high levels of market volatility and charges of market manipulation. The price of GameStop alone soared from less than $4/share to a high of $483/share. During the course of the frenzy, several hedge funds that shorted the meme stocks suffered significant trading losses, at least one retail-oriented brokerage firm faced dramatically increased capital requirements forcing it to limit trading temporarily, regulators demanded information, and Congress held four hearings to determine what happened and whether regulatory reforms were warranted.

My paper, GameStop and the Reemergence of the Retail Investor, forthcoming in the Boston University Law Review, recounts the story behind the GameStop frenzy. It identifies key factors contributing to the reemergence of retail trading, the focus on meme stocks, and the growing power of social media. The GameStop frenzy was distinctive in that it reflected not just stock purchases by a substantial number of retail investors, but the demonstrable impact of those purchases on capital market pricing and volatility. This impact was facilitated by a decline in traditional barriers to capital market participation such as user-friendly brokerage apps, zero-commission trading, and the ability of small investors to purchase fractional shares. An unprecedented use of social media fueled retail engagement in the market even as it has raised questions about the wisdom of investors relying on social media posts to inform their investing decisions. Although the GameStop frenzy may be a product of the times, driven by the confluence of the pandemic lockdown, the liquidity of stimulus checks and the lure of virtual confetti, the reemergence of direct retail investors offers the prospect of a fundamental change in the capital markets. As such, it raises new regulatory questions.

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