Komet Capital

A Public Statement on r/WallStreetBets, GameStop, Robinhood, and the Future of Finance

Over the past week, the world has seen a remarkable display of powerful anti-establishment forces rip through traditional financial markets. It has certainly been an unprecedented phenomenon, but also an inevitable one. While this did take place sooner than we expected, the stage had long been set for a groundbreaking, historic financial event of epic proportions, fueled by Main Street. This revolution in financial markets has been brewing for quite some time. It’s been apparent to anyone paying attention to the incredible Decentralized Finance (‘DeFi’) developments taking place on Ethereum over the past year, where traditional and novel financial market systems have been recreated in an open, democratized environment. In lockstep with these developments, the simultaneous convergence of geopolitical turmoil, failed policy responses to the pandemic, rocketing inequality, excess savings among the employed, widespread boredom, and an acute transition to digitization of commerce, have all created the perfect storm that accelerated the emergence of what we have witnessed over the past week. This second wave of the Occupy Wall Street movement evolved from physically occupying the space at Zuccotti Park — located just steps from Wall Street itself — to now digitally occupying the very arena where Wall Street is playing. But the underlying motivation and sentiment igniting the movement are the same catalysts that we saw 10 years ago. This time, however, they can protest with the mere power of their wallets.

Komet is a true user-centric, financial empowerment platform that allows anyone to become an investor and anyone to become a portfolio manager in a user-owned fund. We are a self-governing fund controlled by our users, not a club of billionaires. A fund powered by, and for, the community. This means that if r/WallStreetBets wanted to collectively organize their financial views as a single unit and translate that into a unified decision, we would grant them the power to do so. What we are experiencing is the beginning of a mass financial extinction event that will completely rewrite the way that finance is conducted. This is a generational rebalancing of power from those who have access, to those who have desire and will. And through Komet, everyone will be able to express their collective desire to make financial decisions as a single, powerful entity, all at the discretion and will of the people themselves.

We invite all R/WallStreetBets users to join us in rebuilding the financial system from the ground up. The democratization of Wall Street is what Robinhood had long promised, but ultimately failed to deliver. Front-running order flow and arbitrarily shutting out its users from assets are exactly the types of behaviors that Robinhood was supposed to liberate its users from. We support the legitimacy of r/WallStreetBets as a decentralized masse of individuals with the autonomy to make financial decisions as its members see fit.

Continuing to shut out Main Street market participants perpetuates the myth that entrenched financial players are the only ones savvy, smart, and ‘sophisticated’ enough to handle market volatility and make sound investment decisions. This is especially ironic considering that these same ‘sophisticated’ investors — who were best suited to understand the risks of entering positions of companies with high short to float ratios — are now the very same ones underwater asking their friends for bailouts.

The idea that all of Main Street is too dumb to understand advanced investment concepts could not be further from the truth. The reality is that there is a vast pool of skilled and talented investors who have been shut out from High Finance for unjust and arbitrary reasons. The industry has always benefited from its status as a privileged, walled off entity that only a select few could access. This restricted access is primarily determined not by merit or performance, but by another layer of restricted access: one’s background. This layer starts from the recruiting pipeline where ‘target universities’ — comprised largely of Ivy League institutions and a few others — are given exclusive interviews for investment banking positions and trading positions. The reality, however, is that like many other jobs, investing and trading is a learned skill. A skill that is developed over time and not one that comes by virtue of a diploma. What kinds of people attend these schools? Well, those with access, wealth, connections, and academic performance as an adolescent in high school. That last point is quite important and also incredibly bizarre. This shouldn’t be a shocking statement, but people undergo a tremendous amount of growth from their adolescent years to an adult. The industry’s prestige-chasing fixation on degrees and schools that were determined by decisions made as teenagers does not have any bearing on someone’s potential as an adult. And it certainly does not take an Ivy league degree to learn fundamental market mechanics like short as % of float, margin calls, and hedging.

Denying Main Street access to the same tools and instruments as the big players under a guise of ‘protection’ ultimately only serves those same ‘sophisticated’ investors who gamed a broken system in the first place. This is not a matter of being anti-fraud or anti-regulation to protect small players. This is a matter of fairness and equality within a system dominated by traditional powers and corporate control.

So perhaps instead of walling off retail access and categorically declaring the ‘unsophisticated’ too dumb to ever understand financial risks, perhaps regulators should embrace the idea of open access education and collective wisdom as a tool for good. Describing users of Reddit, Twitter, and other social media channels as uninformed, greedy speculators is particularly peculiar, given that most of the financial establishment exists for the accumulation of the very same thing — money. It is additionally perplexing when these very same regulators endorse the existence of quant funds who, just like r/WallStreetBets, take advantage of technical irregularities in markets with little regard to ‘fundamentals’ in order to profit.

We envision a future where regulators, traditional investors, and r/WallStreetBets view all market participants on an equal playing field, with less regard to ‘sophistication,’ background and how a person may have spent their teenage years. It is time that the aggregate power of a large collection of individuals is recognized. Just because technology has enabled investment ideas to be funneled through social media channels instead of conferences, exclusive interviews on Bloomberg, private dinners, and other closed channels composed of Ivy-league educated prestige-pumpers, does not invalidate the soundness of these investment theses. We at Komet look forward to working with regulators to create more equitable and efficient marketplaces for all, and building the future of finance that leaves no one behind.

- Michael Stephan
Strategy Lead, Komet

A community-powered hedge fund. Governed and owned by the people. For the people. Launching soon on Ethereum.