In the midst of a stock surge that has taken the financial world by storm, the popular stock-trading site Robinhood has restricted trades of the key stocks at the center of the story. The stock prices have been fluctuating wildly in response to the move, which has already prompted backlash from lawmakers and app users.
GameStop stock dropped more than 50% in just a few hours since the restrictions began, but has been slowly gaining back ever since. AMC similarly fell by roughly 50% at its peak, but currently is only down 10% from market open. At different points today GameStop was as high as $470 and reached a low of $131. As of the time of writing GameStop has largely recovered, to $270.
This comes as the Robinhood app itself is surging in popularity, along with Reddit where the trades are being organized. Robinhood has issued a statement on its policy, chalking it up to monitoring for market volatility.
“We continuously monitor the markets and make changes where necessary,” the company state. “In light of recent volatility, we are restricting transactions for certain securities to position closing only, including $AMC, $BB, $BBBY, $EXPR, $GME, $KOSS, $NAKD and $NOK.”
This follows a similar stoppage from TD Ameritrade. The move has reportedly already prompted a class-action suit filed in the southern district of New York, according to Fox Business reporter Lydia Moynihan.
There has been some calling action to be taken as the value of GameStop and AMC inflate to much higher values than normal. This is being organized by the WallStreetBets subreddit, which is intentionally taking on hedge funds and short-sellers. The subreddit briefly went private during the whole debacle. The subreddit has moved on to AMC in recent days, and the entire situation has even garnered a response from the White House.
Industry analyst Michael Pachter weighed in regarding the halting of trades, coming out against it because the Reddit users are not relying on “material nonpublic information” or making false claims. Those factors would make them potentially guilty of insider trading, but instead the entire scheme was hatched on a public forum where anyone can view it. He said restricting their access is “problematic.”
I am dismayed by trading platforms limiting their customers’ ability to trade GME and other heavily shorted stocks. The Reddit Army doesn’t have any material nonpublic information and isn’t making false claims, AFAIK, and I think restricting their access is problematic
— Michael Pachter (@michaelpachter) January 28, 2021
The calls for action and others have also been met with criticism, as it’s perceived as a move to protect hedge funds from losing out. This has drawn comparisons to the Wall Street bailout. The Robinhood app is currently getting review-bombed, having gotten 100,000 1-star reviews in just over an hour.
after delisting GameStop and AMC, Robinhood has gotten over 100,000 1 star reviews in one hour on the app store, now set with a 1 rating. they deserve it pic.twitter.com/eDNDuPrj8r
— Rod Breslau (@Slasher) January 28, 2021
The move has also gained criticism from some members of Congress. Rashida Tlaib said that blocking the ability to trade is “stealing millions of dollars from their users” to protect hedge funds, while Ted Lieu said it looks like “fear of too much profit going to ordinary investors.” Alexandria Ocasio-Cortez criticized the move as “unacceptable” and said she would support a hearing in her capacity as a member of the Financial Services Committee. Her statement received a tweet of support from Senator Ted Cruz, usually an ideological opponent.
This is beyond absurd. @FSCDems need to have a hearing on Robinhood’s market manipulation. They’re blocking the ability to trade to protect Wall St. hedge funds, stealing millions of dollars from their users to protect people who’ve used the stock market as a casino for decades. https://t.co/CGkJxVfzkv
— Rashida Tlaib (@RashidaTlaib) January 28, 2021
This is unacceptable.
We now need to know more about @RobinhoodApp’s decision to block retail investors from purchasing stock while hedge funds are freely able to trade the stock as they see fit.
As a member of the Financial Services Cmte, I’d support a hearing if necessary. https://t.co/4Qyrolgzyt
— Alexandria Ocasio-Cortez (@AOC) January 28, 2021
The story has been gaining attention throughout the financial world in recent days, leading to a surge of popularity in all of the surrounding applications. As analyst Daniel Ahmad pointed out, the two most downloaded apps right now are Robinhood and Reddit.