GameStop, BlackBerry Stocks Fall As Robinhood, Interactive Brokers Restrict Trading

GameStop, AMC Entertainment and BlackBerry stocks fell Thursday as online brokers Robinhood Markets Inc and Interactive Brokers restricted trading in several social media stocks that had risen sharply this week. The trading frenzy rocked equity markets in the US and elsewhere as stocks with strong short positions rallied and were then sold. The tug-of-war has pitted hedge funds and other short sellers against retail buyers, many of whom are motivated by comments on sites like Reddit.

AMC shares fell 60 percent. GameStop lost 23 percent. Wall Street’s major indexes rose.

GameStop, the video game retailer whose 1,700 percent rally was the focus of the blow last week, initially rose to over $ 480 per share, according to Refinitiv data. It was last at $ 265.

« The Robinhood ban on these stocks ended (the rally) pretty well, » said Dennis Dick, proprietary trader at Bright Trading LLC in Las Vegas.

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« Everyone’s trying to hit the exit button at the same time. If you start scare all the short sellers, there’s no one left to keep prices in check. »

Robinhood also limited trading in BlackBerry, Koss and Express, citing « recent volatility ». It has been criticized by private investors, celebrities and policy makers.

Interactive Brokers, another online trading platform, also restricted trading in these stocks.

« We don’t think this situation will subside until the exchanges and regulators stop or just liquidate certain symbols, » it said.

4:47 Why is Gamestop stock booming? Financial expert explains

On Twitter, many observers argued that trading platforms were trying to protect Wall Street’s interests at the expense of private investors.

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Robin Hood: A Parable of Stealing from the Rich to Give to the Poor. Robinhood: An app to protect the rich from being pressured by the poor, ”tweeted Jake Chervinsky, lawyer for fintech company Compound.

Robinhood experienced a business boom during the coronavirus pandemic as more and more retail customers started trading stocks online. The app now has more than 13 million users.

Social media chat rooms are starting to resemble the squawk boxes on the retail floor as a new generation of retailers gain influence.

American Airlines joined the list of stocks that made gains as petty traders stepped up their battle against major Wall Street institutions, but that, too, was far from previous highs as Robinhood restricted trading.

American Airlines shares rose eight percent. It reported gains, but investors said those were not enough to explain the stock movement.

« It’s irrational day-trading, nothing fundamental. Just like GameStop, Tootsie Roll, Virgin Galactic, etc., » said Darryl Genovesi, an analyst at Vertical Research.

With the “Reddit crowd” upsetting the market, a basket of stocks primarily traded by hedge funds has fallen 2.5 percent this year, while a basket that tracks retail favorites is down 13.5 percent rose, data from Goldman Sachs showed.

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Prior to his retirement, GameStop briefly became the largest stock in the Russell 2000 Small Cap Index, according to Zerohedge.

Dramatic leaps at GameStop, BlackBerry Ltd and AMC have prompted some to call for regulatory scrutiny.

« When it comes to monitoring short-term interest, US markets are probably the most transparent, but there is always room for improvement, » former SEC chairman Jay Clayton told CNBC.

Silver industry stocks also caught traders’ attention. Canada’s First Majestic Silver was briefly halted in New York after shares rose more than 30 percent.

Sharply shortened stocks were also active in Australia and Europe.

The US stock markets recovered early by more than one percent. On Wednesday, the short squeeze – where a rising stock price forces traders to give up losing “short” bets that it will go down – caused the New York S&P 500 to decline 2 percent as investors sold other assets to cover their losses.

Short sellers expect an estimated $ 71 billion in losses this year from positions in US companies, data from analytics firm Ortex showed.

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On a Reddit discussion, thousands of participants replied, “We love this stock” to a post calling for more purchases from GameStop.

The war started last week when Citron Capital’s hedge fund short seller Andrew Left bet against GameStop and encountered a spate of retailers betting the other way. He said on Wednesday that he had given up the bet.

The group of traders, some of whom were ex-bankers long ridiculed by market experts as « stupid money », has grown into an increasingly powerful force over the past year, worth 20 percent of stock orders, UBS data showed .

0:53 White House monitors the inventory of GameStop and other companies

The steady uptrend in stock markets over the past decade, fueled by a steady influx of newly created money from major central banks, has made it less risky to bet on rising stocks.

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The US Federal Reserve firmly opened these taps at this week’s meeting.

The market turmoil caught the White House’s attention when President Joe Biden’s economic team, including Treasury Secretary Janet Yellen, « monitored the situation. »

William Galvin, the regulator of the US state of Massachusetts, asked the NYSE to suspend trading in GameStop for 30 days to allow a cooling off period.

« The prospect of intervention here is clearly high, but it will only shake the (WallStreetBets) community as it only creates a feeling of inequality in the financial markets, » said Chris Weston, chief research officer at broker Pepperstone in Melbourne.

(Reporting by Sagarika Jaisinghani, Shriya Ramakrishnan, Medha Singh, Ismail Shakil Sruthi Shankar and Sanjana Shivdas in Bengaluru, Michelle Price, Anna Irrera, Saqib Iqbal Ahmed and April Joyner in New York and Thyagaraju Adinarayan in London; additional reporting by Chuck Mikolajczak) Jeff Lewis, Tracy Rucinski, Devik Jain, Ankit Ajmera (Writing by Patrick Graham and Nick Zieminski; Editing by Saumyadeb Chakrabarty and David Gregorio)

GameStop, BlackBerry Stocks Fall As Robinhood, Interactive Brokers Restrict Trading
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