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Hedge funds, Gamestop, Reddit investors explained
Video game retailer GameStop’s stock price has been on a rollercoaster this week due to the actions of users on the WallStreetBets subreddit and the subsequent blocking of their ability to buy stock by several online brokerages.
The Reddit users pushed the stock up from $20 on 11 January to a high of $146.97. At its peak on Thursday morning, the stock was valued at 468.49. Other stocks with a similar profile to GameStop – firms that have struggled in the pandemic – have also soared in value including Bed, Bath & Beyond, AMC, and Nokia.
The decision by online brokerage Robinhood and others to stop the purchase of a number of stocks by amateur investors led to a sharp backlash online and a demand for an investigation by both market commentators and lawmakers.
After the morning surge in value in pre-market trading, stock in GameStop dropped sharply as markets opened on Thursday, before climbing again. By lunchtime it was down 32 per cent, eventually closing down 44 per cent wiping out almost $11bn in market value.
However, Robinhood announced it will allow limited purchasing of the restricted stocks on Friday causing a bump in the value of shares after the closing bell.
Was this Wall Street’s equivalent of a populist uprising as some are saying or were other forces at work? Elizabeth Warren questioned the David vs Goliath narrative in her calls for more regulation and a sharper toothed SEC.
Both the House and the Senate will now hold hearings into what transpired.
Follow all the latest in our rolling coverage.
Jon Stewart joins Twitter and uses first post to defend GameStop investors
“This is bull***t. The Redditors aren’t cheating, they’re joining a party Wall Street insiders have been enjoying for years. Don’t shut them down…maybe sue them for copyright infringement instead!!” the former Daily Show host tweeted.
“We’ve learned nothing from 2008.”
The Twitter account is not officially verified by the social media giant, but quickly picked up more than 65,000 followers, including Alexandria Ocasio-Cortez and Barack Obama’s former speech writer Jon Favreau.
Graeme Massie28 January 2021 23:41
More on Elon Musk lashing out at short sellers
Tesla boss says the practice is ‘legal only for vestigial reasons’ — Graig Graziosi reports.
Oliver O’Connell28 January 2021 22:43
A ‘seminal moment’ for finance
Reddit has found itself at the centre of a stock market war of attrition, as investors from its WallStreetBets forum attempt to “shot squeeze” a group of hedge funds attempting to short sell GameStop stocks.
Graig Graziosi reports on what Reddit co-founder Alexis Ohanian had to say about his platform’s role in this week’s market moves.
Oliver O’Connell28 January 2021 22:25
Defiant billionaire says he’s ‘trying to make a living’ after GameStop loss
Steve Cohen, owner of the New York Mets, took some abuse on Twitter, but defiantly told his detractors to “keep bringing it”.
Oliver O’Connell28 January 2021 22:08
Rep Ilhan Omar: ‘Strange things happen’ when the profits of billionaires are threatened
Democrat representative Ilhan Omar is clear where she stands on the possibility that the public was deliberately cut off from buying stocks to protect short positions of hedge funds.
Oliver O’Connell28 January 2021 22:02
AOC tells Ted Cruz she won’t work with him on Robinhood probe
Graig Graziosi has more on a Twitter response for the ages.
Oliver O’Connell28 January 2021 21:50
More from Mr Belfort
To Redditors he says: “Be a bit smarter with the companies you pick.”
“This is a great strategy you have going … They should keep doing it.”
Oliver O’Connell28 January 2021 21:43
Robinhood to allow limited buying of restricted stocks
On Friday, online brokerage Robinhood will allow “limited buys” of securities that were restricted on Thursday.
The firm said in a statement: “Starting tomorrow, we plan to allow limited buys of these securities. We’ll continue to monitor the situation and may make adjustments as needed.”
Shares in the effected companies, including GameStop and AMC, jumped in extended trading on the news.
GameStop’s share price rose 28 per cent to $247 after the closing bell.
Oliver O’Connell28 January 2021 21:34
House to hold hearing on short selling and online trading
House Financial Service Committee to hold hearing on short selling and online trading platforms, Chairwoman Maxine Waters announces.
Oliver O’Connell28 January 2021 21:30
GameStop closes down 44%
After a rollercoaster day, shares in GameStop closed down 44 per cent on the previous day’s close at 193.6.
Early trading saw the share price spike to 468 points.
Overall the Dow Jones Industrial Average closed up 300 points at 30,603.
Oliver O’Connell28 January 2021 21:28
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