- Over the past few days, shares of GameStop jumped by more than 1,000%. The rise can be traced back to the subreddit r/wallstreetbets, which encouraged everyone to purchase the stock.
- As GameStop’s stock rose, short-sellers were forced to cover their positions. Some hedge funds lost billions in the process.
- The Robinhood app and other brokerages no longer allow anyone to purchase shares of GameStop, a move that U.S. Representative Alexandria Ocasio-Cortez believes needs to be investigated.
The ongoing saga involving GameStop’s sudden and meteoric stock rise may have started as something of a goof on Reddit, but it has since attracted the attention of lawmakers on both sides of the aisle.
With a good percentage of GameStop stock buys coming via the Robinhood app, the company earlier today implemented a rule preventing anyone from purchasing additional shares. Traders are still free to close out their position, but buying more shares is not allowed.
Robinhood put up the following message on its blog this morning:
In light of recent volatility, we are restricting transactions for certain securities to position closing only, including $AAL, $AMC, $BB, $BBBY, $CTRM, $EXPR, $GME, $KOSS, $NAKD, $NOK, $SNDL, $TR, and $TRVG. We also raised margin requirements for certain securities.
Compounding matters is that Melvin Captial Management — a hedge fund that reportedly lost billions when GameStop’s stock skyrocketed — was partially bailed out with a multi-billion cash infusion from a hedge fund called Citadel. And Citadel, as it turns out, is a partial owner of Robinhood.
In light of the above, U.S. Representative Alexandria Ocasio-Cortez thinks there needs to be an investigation into Robinhood’s new restriction. Hardly a unique position, many people are arguing that Robinhood’s restriction is nothing short of market manipulation. After all, restricting stock purchases will inevitably drive GameStop’s stock price down. Indeed, the stock is down more than 30% today and is currently trading at $240 per share.
Addressing the issue via Twitter earlier today, AOC said:
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.
Notably, republicans and democrats alike share AOC’s sentiment. Tim Cruz, for instance, responded to AOC’s tweet by saying “Fully agree.”
AOC, however, isn’t exactly inclined to work with Cruz in light of the U.S. Capitol riots from earlier in the month.
“I am happy to work with Republicans on this issue where there’s common ground,” AOC said in response to Cruz, “but you almost had me murdered 3 weeks ago so you can sit this one out. Happy to work w/ almost any other GOP that aren’t trying to get me killed.”
And closing things off, AOC added: “In the meantime if you want to help, you can resign.”
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