By CATHERINE THORBECKE, ABC News
(NEW YORK) — The unprecedented rally of GameStop stock, propelled largely by retail investors, faced a new hurdle Thursday after trading platforms including Robinhood restricted users from purchasing shares of the electronics retailer.
In addition to GameStop stock, the Robinhood also restricted certain transactions for other stock touted by the sub-Reddit page r/wallstreetbets including shares of AMC Theaters, BlackBerry and Bed Bath & Beyond.
“We continuously monitor the markets and make changes where necessary,” Robinhood said in a company blog post. “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. We also raised margin requirements for certain securities.”
When Robinhood users logged in Thursday, they were informed they could no longer buy shares of GameStop but could still sell them — which would essentially lower the price.
Robinhood’s blog post did not provide much more information as to the reason for this abrupt halt, but touted its finance “educational resources.”
“Amid significant market volatility, it’s important as ever that we help customers stay informed,” the company stated. “That’s why we’re committed to providing people with educational resources. We recently revamped and expanded Robinhood Learn to help people take advantage of the hundreds of financial resources we offer and educate themselves, including how to make sense of a volatile market. In 2020, more than 3.2 million people read our articles through Robinhood Learn.”
Fellow trading platform TD Ameritrade also confirmed to ABC News on Thursday that it had “placed restrictions on some transaction” for GameStop stock.
“TD Ameritrade has not halted trading in any securities. We have placed restrictions on some transactions in $GME and other securities,” the company told ABC News in a statement. “Restrictions, which differ from security to security and are subject to change, may include actions like increasing margin requirements, or limiting certain types of transactions, like short sales and those that may involve unlimited risk.”
“It is not uncommon for us to make such decisions, which we consider on an individual basis, in the interest of mitigating risk,” the statement added. “We have been adjusting our requirements for several days as we continued to see trends indicating unusual volume in an unprecedented market environment, which appear to be divorced from traditional market fundamentals. We have made what we believe to be prudent and appropriate decisions to place some limits on certain transactions for certain securities.”
The massive rally for GameStop stock stems from r/wallstreetbets, where amateur traders convened to share investing ideas and more.
The forum has grown into a community of some 3 million, and coupled with the rise of trading apps such as Robinhood, these retail investors have shown immense power over financial markets this week as they pushed the price of GameStop to unprecedented highs.
GameStop, meanwhile, has largely struggled as a retailer in recent years and traditional investors were scratching their heads at its recent stock rally. As of Wednesday, the stock had climbed nearly 2,000% since the beginning of the year.
The holds and controversy seem to have created an especially volatile day for GameStop stock.
While GameStop shares initially climbed early Thursday despite the Robinhood hold, by 11:30 a.m. ET they had plummeted some 50%, and were trading at around $150 a share. On Wednesday, they closed at just under $350 a share. Just a few weeks ago, GameStop was trading for less than $18 a share.
The actions of the trading platforms sparked immediate backlash Thursday from lawmakers and political figures on both sides of the aisle.
Progressive Rep. Alexandria Ocasio-Cortez, D-NY, called the restrictions on GameStop stock “unacceptable” in a Thursday morning tweet.
“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,” she wrote, adding that she would support a hearing “if necessary.”
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
Meanwhile, Donald Trump Jr., tweeted calling the system “rigged.”
It took less than a day for big tech, big government and the corporate media to spring into action and begin colluding to protect their hedge fund buddies on Wall Street. This is what a rigged system looks like, folks! #RobinHood #RedditArmy #GME #GMEtothemoon https://t.co/UhrwGHCjng
— Donald Trump Jr. (@DonaldJTrumpJr) January 28, 2021
“It took less than a day for big tech, big government and the corporate media to spring into action and begin colluding to protect their hedge fund buddies on Wall Street,” he wrote. “This is what a rigged system looks like, folks!”
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