In A Stunning Bid To Control Redditors, Robinhood Restricts Sales On Several Popular Stocks

The popular retail trading app Robinhood restricted sales on Thursday for several popular stocks that have gone viral this week. Retail traders found on Thursday morning that, at market open, the app would not allow the purchase of stock from companies like GameStop (NYSE: GME), AMC Theaters (NYSE: AMC), Nokia (NYSE: NOK), BlackBerry (NYSE: BB), Naked Holdings (NASDAQ: NAKD) and several other securities in an effort to control high market volatility.

Retail traders have congregated in recent days on apps like Reddit and Twitter to purchase stock in companies that had been massively short sold by hedge funds in recent months. Short selling is a practice that allows traders to effectively bet against the odds of a public company by selling shares in that company with the expectation that the shares will continue to go down. The practice relies on shares in the company to stay low under the assumption that the company will eventually go under

GameStop, the stock that triggered the online movement, had more shares short sold than the company had available in the first place. Traders noticed the discrepancy months ago and began buying shares in the company when they were low (meaning under $10 per share). By mid-January, shares in GameStop had skyrocketed to more than $70, eventually reaching record highs this week at $483 on Thursday just before Robinhood announced it would remove the company from its app.

“We’re proud to have created a platform that has helped everyday people, from all backgrounds, shape their financial futures and invest for the long term,” wrote Robinhood in a statement before revealing it would limit retail trading on popular securities that have triggered historic wealth redistribution. “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,” the statement read.

Hours later, a class action lawsuit was filed against Robinhood in New York’s Southern District, claiming that the trading app allegedly engaged in market manipulation as a favor to the hedge funds that are hemorrhaging cash in the wake of the GameStop surge. Just this week, the hedge fund Melvin Capital that had over shorted the GameStop stock in recent months lost several billion dollars in a matter of days. The exact numbers are unclear, but the hedge fund reported a 30% loss earlier this week before receiving a $2.75 billion cash injection from Citadel LLC and Point72 Asset Management.

Global financial regulators and government officials say that they are actively monitoring the situation. The White House said on Wednesday that it is monitoring the GameStop situation. The Guardian also reports that the UK’s Financial Conduct Authority says it is aware of the situation and will “closely monitor trading in UK markets.”

Robinhood did not immediately respond to Grit Daily’s request for comment.

Avatar

Julia Sachs is a former Managing Editor at Grit Daily. She covers technology, social media and disinformation. She is based in Utah and before the pandemic she liked to travel.

Read more

Grit Daily's Podcasts


Listen to The Like a Boss Podcast

News


VeeCon Preview: Gary Vaynerchuk on Grit Daily News
Danni Peck
on May 14, 2021

VeeCon Preview: Everything Gary Vaynerchuk Ever Wanted in a Conference

An NFT convention? Is that even possible? It’s more likely than you think. Gary Vaynerchuk, wine critic and entrepreneur and co-founder of restaurant reservation software such as Resy and Empathy Wines, has announced VeeCon for any VeeFriends token holders. VeeFriends is an NFT project created by Vaynerchuk that showcases his NFT collection of art. With […]

Peter Page
on May 13, 2021

ScriptDrop CEO Amanda Epp Explains Why Prescription Home Delivery Will Outlast the Pandemic

Timing, as it has long been said, is everything but sometimes timing is dictated by what nobody could plan for – one example being a global pandemic. When ScriptDrop, a very fast growing startup prescription delivery company based in Columbus, Ohio, was launched in 2017 with Amanda Epp as CEO, demand for its service was […]

Sarah Marshall
on May 11, 2021

Adam Anderson of Hook Security Views Entrepreneurship—and Cybersecurity—in Unconventional Ways

Adam Anderson is not your typical entrepreneur. He has founded multiple companies, but now, he helps CEOs fire themselves. While CEO may sound like the dream job, Anderson believes that many CEOs can help their companies by putting effective leadership teams in place and then getting out of the way—transitioning from the role of CEO […]

Stewart Rogers
on May 11, 2021

Socialstack Lands Funding to Build Global and Diverse Social Token Economies

Socialstack, a social token protocol, has announced today that it has received $200k in funding to launch a new way for creators to interact with their community and fans. The protocol, which is on both Ethereum and Celo, was backed by the likes of Novum Insights, Aubrey Hruby, Decentranet, Adrianna Mendez, and Alan Laubsch. Solutions […]