GameStop's Wild Ride Resumes After Restrictions Eased

Robinhood is being sued over Thursday halt
By Rob Quinn,  Newser Staff
Posted Jan 29, 2021 7:20 AM CST
GameStop's Wild Ride Resumes After Restrictions Eased
The logo for the Robinhood app on a smartphone in New York.   (AP Photo/Patrick Sison)

(Newser) – GameStop's wild ride isn't over yet. The Robinhood online brokerage, which caused an outcry Thursday by halting buying of GameStop, AMC Entertainment, and other stocks targeted by Reddit users, loosened restrictions early Friday. All 13 stocks in question soared in premarket trading, the Wall Street Journal reports. GameStop surged 100% and AMC was up 54%. In a blog post, Robinhood—the favored trading app for the small investors causing massive losses for hedge funds—said some limits would remain in place, with users restricted to buying a maximum 5 GameStop shares and 10 options contracts. More:

  • Class-action lawsuit filed. A Robinhood user filed a class-action lawsuit against the company Thursday, arguing that the company's actions had deprived customers of potential gains, CNN reports. "Robinhood's actions were done purposefully and knowingly to manipulate the market for the benefit of people and financial institutions who were not Robinhood's customers," the lawsuit states. More than 40,000 users have joined a new r/ClassActionRobinHood forum on Reddit as of this writing.

  • A "generational fight." Analyst Neil Wilson tells the BBC that while plenty of users of the influential r/WallStreetBets forum have profited from pumping up GameStop shares, their discussions show it is about more than money. "They seem hell-bent on taking on Wall Street, they seem to hate hedge funds and threads are peppered with insults about 'boomer' money," he says. "It's a generational fight, redistributive and all about robbing the rich to give to the millennial 'poor.'"
  • Facebook shuts down traders' group. Facebook has shut down the Wall Street discussion group Robinhood Stock Traders, the Guardian reports. The company says the 157,000-member group was taken down for reasons "unrelated to the ongoing stock frenzy," with a notification stating it had run afoul of Facebook's policy on "adult sexual exploitation." But founder Allen Tran blames the move on the influence of large investors and says he hasn't seen such content appear.
  • Robinhood raises $1 billion from investors. Sources tell the New York Times that Robinhood, facing unprecedented levels of trading, contacted investors Thursday to raise $1 billion to ensure it could meet the lending requirement for further trading. The insiders say the investors were offered additional equity in the company, which plans to go public later this year.
  • SEC is watching developments. The Securities and Exchange Commission has said it is keeping a close eye on market volatility. But Chester Spatt, a former chief economist at the SEC, says it will be difficult for the regulator to declare conversations on Reddit a clear case of market manipulation.
  • A long month for short-sellers. Reuters reports that according to financial data firm Orbex, short-sellers who bet on stock prices going down have lost more than $70 billion so far in 2021 after being forced to buy back into companies like GameStop to cover their positions.
  • Meanwhile, in Sherwood Forest. In Britain, the Robin Hood Society for fans of the famous outlaw went from fewer than 400 followers to more than 40,000 Thursday, the BBC reports. "Lovely to have all these new followers," the society tweeted. "Can we just check that you know that you’re following The World Wide Robin Hood Society in Nottingham and not the Robin Hood App .. if so .. a big welcome from Sherwood."
(Jon Stewart joined Twitter to comment on the chaos.)

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