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How ‘gamer investors’ are pushing a new wave of social responsibility
A new generation of younger retail investors are pushing a new social movement, yielding a distributive impact on the markets, most notably through the GameStop saga, two researchers have revealed.
How ‘gamer investors’ are pushing a new wave of social responsibility
A new generation of younger retail investors are pushing a new social movement, yielding a distributive impact on the markets, most notably through the GameStop saga, two researchers have revealed.
A new report drafted by the Monash University and Louisiana State University has revealed the impacts Millennial and Gen Z retail investors – adequately termed the wireless investors – are having on corporate governance by driving a social movement with disruptive effects.
These young investors, who blame the Boomers for a variety of social and environmental problems, are using social media, apps and online forums – like the Reddit subreddits r/WallStreetBets and r/amcstock – to coordinate their actions in a gaming-like fashion and obtain unprecedented results.
But not only are the wireless investors choosing to invest their money directly, overlooking the brokers, they are more inclined to use the voting powers yielded by their investments, the research has shown.
According to Professor Christina Sautter from Louisiana State University, “Unlike in the past when only approximately 30 per cent of retail investors on average have exercised their voting rights, these retail investors appear more inclined to vote.”
“For example, with AMC, retail shareholders are discussing on social media and in online forums how they intend to vote their shares at AMC’s upcoming July shareholders’ meeting, and they are encouraging other retail shareholders to vote their shares as well.”
As such, with Millennials set to inherit up to $68 trillion over the next two decades, Dr Gramitto Ricci, lecturer in the Department of Business Law and Taxation at Monash Business School, explained that wireless investors may be able to push the button to shift corporate behaviour, possibly reducing short-term thinking and increasing corporate focus on ESG goals.
The GameStop saga, which saw wireless investors take aim at Wall Street hedge funds and the global financial hierarchy, was a great example of this power.
Such actions possibly drove the 3,000 per cent surge in US GameStop shares in January 2021, while inflicting losses of almost $20 billion on the hedge funds and other short-sellers.
But the movement is only set to grow, Dr Ricci believes, noting that by engaging with corporate governance, wireless investors are likely to attract other investors by their achievements. This could, in turn, result in the removal of the investing and corporate governance power out of the hands of Wall Street and into the hands of ordinary people.
“More and more people will likely withdraw their money from institutional investors and buy corporate shares directly. This significantly increases the probability that the voice of the ordinary person, expressed via voting, plays a relevant role in corporate governance,” Dr Ricci said.
“If the movement gains traction, investors who initially perceived themselves as powerless with respect to ESG goals would finally realise that their votes count and join the effort.”
Dr Ricci further explained, “This would snowball into a collective power to steer corporations toward ESG goals. Wireless investors and other early adopters will be followed by other retail investors and possibly by institutional investors as well.”
Moreover, Dr Ricci and Professor Sautter believe ESG voting will likely become a new social norm.
“With a plot twist, the paradigm shift that makes corporations serve the interests of a broader range of stakeholders would come at the hands of shareholders,” Dr Ricci concluded.
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