The WallStreetBets Craziness Reminds Me of 1999

There’s been a lot of hand-wringing lately over the power of online message boards, such as the subreddit WallStreetBets. Time and again, the boards’ users have swarmed to bid up the prices of stocks — GameStop, AMC Entertainment Holdings, BlackBerry — to absurd levels, leading some observers to wonder whether we’re entering some kind of financial virtual reality.

Actually, this is nothing new. Stock message boards have been around for nearly 30 years — long before the term “social media” was adopted. I wrote a story in 1999 about how the venues were being used to pump up a tiny, profitless internet company called Imaginon Inc. Then as now, regulators were wondering what, if anything, they should do to rein in the worst abusers.

When the Securities and Exchange Commission has acted, it has usually gone after stock manipulation or so-called pump-and-dump schemes, based on laws that date back to 1934. That was when stocks were traded with real stock tickers and rumors didn’t move quite so quickly.

My hope is that the renewed attention being paid to these online communities will result in some thoughtful regulation — something that allows people to express honest opinions about a particular stock or investment strategy, but deters the bad actors. One option would be to eliminate the anonymity that has become a defining characteristic of these venues — so people would know, for example, that DeepF-----gValue, the name that GameStop trader Keith Gill used on WallStreetBets, was actually a registered securities broker in Massachusetts.

It won’t be easy. As we’ve already seen with other parts of the internet, companies that provide online boards, such as Reddit, aren’t particularly willing or able to figure out which posts are problematic. Monitoring activity in real time to prevent crazy swings seems downright impossible. As we’ve seen with efforts to crack down on the communications of right-wing extremists in the wake of the attack on the Capitol, locking down one form of communication (Parler) just leads people to others (Signal or Telegram).

Back in 1999, when I wrote about message boards and Imaginon, the director of governmental relations for Yahoo said “We're just not going to censor to deal with a few kooks.” Of course, censorship should not be taken lightly. But the “few kooks” from 22 years ago have metastasized into a force that is moving the markets in ways that nobody anticipated. 

Yahoo and the other popular boards of yore — Raging Bull, Silicon Investor, and Motley Fool — averaged fewer than 10,000 posts a day each. It's not uncommon for some threads on WallStreetBets to attract 10 times that number. And that’s just one venue. All the old boards are still around and there are many more forums, including Twitter, YouTube and TikTok. Trading stocks and especially options used to be a lot trickier and expensive, too. Now anyone can do it on Robinhood and other apps, for free.

To move a stock, the early message boards had to focus on companies few people had heard of — those that traded “over the counter,” with small market caps and low volume. Now they can go after much larger targets. Imaginon briefly reached a market capitalization of almost $200 million. GameStop’s swelled to $24 billion. 

Some have recognized the need for guard rails. As Arthur Levitt Jr., then chairman of the SEC, put it in a 1999 speech: “While the scams we have seen on the internet are the same basic frauds that have always accompanied the flow of money, the internet’s speed, low cost and relative anonymity give con artists access to an unprecedented number of innocent investors.” He created the Office of Internet Enforcement to bring the SEC into the modern age, but the effort didn’t result in new rulemakings.

It’s not too late to pick up where Levitt left off. But first, everyone needs to take a giant cleansing breath, lest new rules adopted in the midst of all of this craziness make things worse rather than better.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Michelle Leder is an expert on SEC filings, having launched her site,, in 2003 after writing the book "Financial Fineprint: Uncovering a Company’s True Value."

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