Writing

David Emerges

By on February 1, 2021

David, the youngest of 12 siblings, remained far from the frontlines of the bloody war with the Philistines in 11 century BC.

A gargantuan, 9 foot tall, sneering Goliath was the bastion of the hegemony the Philistines had over the Israelites.

Things changed dramatically when David, an unlikely hero, travelled to the front and brought down the giant with stones and a handy slingshot aimed at his temple.

Something similar happened in #WallStreet last week.

Finance may never be the same again.

It was perhaps, the first confluence of social media and radical financial upheaval: a group of novice captains taking down a full-bodied armada on the high seas of international finance.

An unlikely army of amateur traders banded together on Reddit to collectively buy #gamestop stock to inflate the stock price of a company they love but which was seen as likely heading the way of Blockbuster. You download games these days, you see.

With the “short squeeze” that ensued and having lost billions, a vigilante smile was difficult to avoid when Hedge Funds started calling for “more regulation” – something they have vociferously lobbied against for decades.

It hurts when it’s your hand on the stove.

The Securities Exchange Act of 1934 makes it a criminal offense to meddle with the market with any “manipulative device or contrivance” in buying or selling regulated shares.

Traders sharing strategy on an online forum is not market manipulation unless its malafide.

Famed and vocal investor, #ChamathPalihapitiya has openly talked about “Idea Dinners” where, over fine red wine and 21 year old scotch, the very rich talk about investing in small, listed companies and pumping up their price and then sell at the inflated price.

How is Reddit different from an “Idea Dinner”?

For one, the dinner guest aren’t billionaires.

They are the David’s of this financial world. With 70% of the US equity market made up of institutional money, retail investors don’t usually move stock prices.

But last week, they hammered the temple of the hedge fund Goliaths.

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Kamal K. Jabbar
Dubai

Kamal is a Partner at Keystone Law Middle East LLP with over 18 years of banking, finance, corporate and commercial law experience in the MENA region. An England & Wales qualified barrister, he advises individuals, start-ups and SMEs in mitigating legal risk and expanding their operations in the Middle East and beyond.

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