Before WallStreetBets: A history of online message boards and 'stonks'

Brian Cheung
·4 min read

Ja Rule is among the latest to support the WallStreetBets push on shares of GameStop (GME). But the Queens-born rapper is not the only relic of the 2000s bringing nostalgia to the stock frenzy of the last week.

The r/WallStreetBets community on Reddit appears to be the modern reincarnation of online message boards of years’ past. Sites like Silicon Investing, Raging Bull, and this one — Yahoo Finance — served as open forums for investors to anonymously float ideas during the dot-com bubble that popped in 2000.

And just as the myriad of dot-com stocks included stories of fraud, so did posts on message boards, where some furious posters met their fates with the Securities and Exchange Commission (SEC).

What makes the 2021 Reddit frenzy over “meme stocks” different, however, is its massive scale. The r/WallStreetBets subreddit boasts about 8 million users, with some daily threads pulling in upwards of 99,000 comments.

For comparison, Yahoo Finance’s buzziest message board day in 1998 hauled in just short of 12,000 messages.

Research from Peter Wysocki from 1998 details daily message-posting volume on Yahoo Finance.
Research from Peter Wysocki from 1998 details daily message-posting volume on Yahoo Finance.

The virality of WallStreetBets explains the more dramatic swings in its targeted stocks. But the advent of zero-commission trading has entangled brokerage firms, the hedge fund industry — and now, the previously-arcane world of clearinghouses — into the story.

“Seeing this mass chat room chatter do something that we've never seen before is a little bit reminiscent of the Yahoo chat boards from the 1990s,” Kevin Simpson, portfolio manager at Capital Wealth Planning, told Yahoo Finance Live.

In 1996, a user named Peter Caradonna started a thread on asking about Zitel, a software company that aspired to help companies avoid the Y2K bug.

Hysteria ensued. Would computers survive the date changing from 1999 to 2000? Doom-proofing became an investment thesis for those on Motley Fool and Silicon Investor, who posted thousands of comments focused on the Fremont-based Zitel.

A 1996 post on a thread focused on Zitel.
A 1996 post on a thread focused on Zitel.

Rumors of short sellers needing to cover their positions swirled. So did talk of George Soros acquiring a stake (which turned out to be untrue).

Zitel stock went up so much that the company split its shares in November 1996, only to have it triple in price again in the month after. Zitel shares would end up coming back down to earth, but the story did not end in disaster. The company ended up merging with a company called Fortel in 2000.

Similarly, the world’s computer network did just fine as the millennium arrived on New Year’s Day of that year.

Another example: the Whoopi Goldberg-endorsed, which aspired to create a digital currency to use at online merchants. The company’s demise in 2001 was predicted by those on the rumor site F****, a community dedicated to “happy fun slander” against companies with perceivedly poor management.

Tales of misinformation and fraud

Some users of the dot-com era message boards were masquerading as normal retail traders.

Consider John Mackey, the co-founder and CEO of Whole Foods. Under the pseudonym Rahodeb, the executive posted more than 1,100 comments on Yahoo Finance message boards, many of which were targeted at Whole Foods rival (and eventual acquisition target) Wild Oats.

Rahodeb’s other messages described Mackey as “cute” and “a model for Brooks Brothers!”

Mackey would apologize for the posts as the Federal Trade Commission and the SEC investigated the matter.

In 1999, rumors surfaced on a Yahoo Finance message board that PairGain Technologies was being acquired by an Israeli company, linking to a supposed Bloomberg News Service page. The stock soared 31% on the news.

The problem: the Bloomberg link was phony. And the message was entirely fabricated by a PairGain Technologies employee who got busted by the SEC.

The same year, Jonathan Lebed began duplicating messages in various Yahoo Finance boards promising 1,000% gains in shares of nine penny stocks. The scheme appeared to work in moving shares of companies like Yes Entertainment and Just Toys higher, at which point Lebed cashed in, netting almost $273,000.

The SEC charged Lebed in 2000 for pumping-and-dumping, days before his 16th birthday. He had reportedly developed an interest in stock trading at 12.

“I implore investors to be highly skeptical of any advice they receive from the internet,” an SEC administrator told the New York Times.

Brian Cheung is a reporter covering the Fed, economics, and banking for Yahoo Finance. You can follow him on Twitter @bcheungz.

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