If you’re even remotely interested in investments, or even just use twitter, you’ve probably heard lots of talk around Reddit, short-selling, GameStop, and the Robinhood Stocks portfolio app. Earlier this month the stock price for brick and mortar video game store GameStop was valued at roughly 20 dollars per share, and large scale investors such as Hedgefund as Melvin Capital began shorting the shares in hopes to profit off of the reduction in the stock’s value. While the exact origins of the online movement are unknown- whether due to a deep love of video games or a reach towards greater class consciousness, the subreddit r/wallstreetbets collectively skyrocketed the price of the stock, increasing its value over 2,000% at its highest point. With the value of the stock rising against the bets of the large scale short sellers, some of wall street’s biggest hedge funds faced epic losses. According to analytical firm S3 Partners, short sellers in GameStop were down $US5 billion ($A6.5 million), which included $876 million of losses early Tuesday, reported the New York Post.
After a tumulus week of Wall street investors losing sleep, the popular stock trading app Robinhood Stocks made a decisive and possibly damning decision. Last Monday the app announced that it would be restricting all purchases of GameStop, AMC, and a few other volatile stocks and limiting users to only using a sell function. In a clear act of market manipulation, and as well as an act against its name-sake principal, this move by Robinhood angered both user and regulators alike. Politicians on both sides of the isle called out the company for its unfair and possibly illegal action. Former President Donald Trump, Texas Senator Ted Cruz, and New York Representative AOC all spoke out against the app’s move.
13 Representative have called for the Robinhood CEO Vlad Tenev to be requested for a congressional hearing regarding the app’s decision.
While the app has since slowly reopened the buying ability of previously restricted stocks for its user, many are fleeing the app and taking their (now larger than ever) investments with them. Similarly, the restricted do not seem to have pushed many small investors to sell off their stock in GameStop, as the stock price was up 65% from yesterdays closing at the time of writing.
With Robinhood both bleeding customers, facing a slew of law suits, and a possible congressional hearing, its hard to say if their decision to bail out big Wall street investors was worth it. Only time will tell if the app can reclaim consumer confidence, and if the collectivism of reddit stock traders will be here to stay.
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