GameStop: attempts to stop the wild trade
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Until yesterday, the response would have been next to nothing. But now, thanks to inevitable attention caused by more than 300% fluctuations in intraday trading in the shares of video game retailer GameStop, the to the left and hard right politicians have found common ground in the need to defend small investors.
“This is unacceptable,” Democrat MK Alexandria Ocasio-Cortez tweeted. “We now need to know more about Robinhood’s decision to prevent retail investors from buying stocks while hedge funds can freely trade stocks as they see fit. As a member of the Financial Services Committee, I would support a hearing if necessary.
The comments came after overnight decisions from Robin Hood, and at least one other trading venue, to restrict subsequent purchases of shares of GameStop, which went from $ 3 to almost $ 500 in less than six months, with no significant change in their underlying unprofitable business.
In the same way that small investors have piled up on discussion board guidelines to buy GameStop stock, other lawmakers, exchanges and regulators are now lining up to take a closer look at the unprecedented volatility.
Ahead of the opening of markets in New York on Thursday, January 28, the Robinhood financial platform updated its users – of which 50 percent are estimated to hold Gamestop shares – that he was changing the rules.
“We are constantly monitoring the markets and making changes if necessary. In light of recent volatility, we are limiting trading for certain securities to closing positions only, ”said a company review indicated – a move that put GameStop and a dozen other companies on the shortlist, many of which faced the same mockery from traditional Wall Street investment firms.
Stocks on the list include: American Airlines, AMC Theaters, Blackberry, Bed Bath and Beyond, Castor Maritime, clothing company Express Inc, helmet maker Koss, Naked Brands apparel and swimwear, Nokia, Canadian cannabis company Sundial Growers, Tootsie Roll and Travigo, the German branch of Expedia.
“In the interest of mitigating risk to our business and our customers, we have put in place several restrictions on certain transactions at GameStop, AMC theaters and other titles,” TD Ameritrade said, noting that such measures are not uncommon. “We have been adjusting our requirements for several days as we continue to see trends indicating unusual volume in an unprecedented market environment, which appear to be separated from traditional market fundamentals. We have made what we believe to be prudent and appropriate decisions to place certain limits on certain transactions for certain securities.
Who are the movements protecting?
According to most accounts, the only investors who have been hurt (so far) by GameStop’s meteoric rise are the big, sophisticated hedge funds that were selling the stock short (or betting it would drop) and have since been forced to enter the market and buy stocks at inflated prices to close their trades and stop their losses.
On the other side of the market, small individual investors who follow the Reddit WallStreetBets discussion group defiantly opposed conventional wisdom and pushed the stock higher.
“Individual investors are deprived of their ability to trade on Robinhood. During this time, hedge funds and institutional investors can continue to trade normally, ”noted a WallStreetBets Twitter user known as WSB Mod. “What do you call a market that removes the ability of retail investors to buy to save the short positions of institutional investors? “
Despite these interventions, at noon Thursday (January 28), Gamestop shares were trading between $ 112 and $ 482, after closing at $ 347 on Wednesday.
“We are aware of the current volatility in the options and equity markets and actively monitor current volatility and, in line with our mission to protect investors and maintain fair, orderly and efficient markets, we are working with our fellow regulators to assess the situation and examine the activities of regulated entities, financial intermediaries and other market players, ”noted a press release from the Security and Trade Commission (SECOND).
Wedbush analyst Michael Pachter, who has covered GameStop for years and, as of Jan. 11, called the stock “neutral” with a price target of $ 16 on Wednesday (Jan.27), said Yahoo! Finance that he was as mystified as everyone else. “It doesn’t mean anything to the company,” Pachter said. “I mean, I guess it’s fun to be a cult action and it’s fun to have a lot of people talking about you, but they’re not going to do anything differently because the course of their action has dramatically. increased, other than maybe issuing a little bit of equity and paying off some of the debt.