Meme stocks, GameStop, and Robinhood’s bid to save itself

Jay Owen Reforming Global Finance, SRI/ESG News

“More evidence of the need to fundamentally reform stock markets, as we warned in “Perspectives on Reforming Electronic Markets and Trading“ of the threats posed by computerized trading.  Stay tuned!

~Hazel Henderson, Editor“

 

The past few days of trading have seen more drama than a Hollywood movie (The Wolf of Wall Street seen here).PHOTOGRAPH: AF ARCHIVE/ALAMY

 

Robinhood Restricts GameStop Trading—in a Bid to Save Itself

BY BRIAN BARRETT

 

THE ONLINE BROKERAGE Robinhood launched in 2013 with an egalitarian pitch worthy of its namesake: commission-free trading on a platform that has the common investor’s interests at heart. That veneer has shown cracks over the years, but perhaps none so visible as this morning, when Robinhood users found themselves unable to purchase the so-called meme stocks, like GameStop and AMC, that the WallStreetBets community on Reddit had recently sent soaring.

You could still sell those stocks—most of which still rank among the most widely held on the platform, according to the Robinhood app’s frequently updated “Most Popular” list—but otherwise? No dice. And while experts say that Robinhood was within its legal and regulatory rights to shut down the stonks party, its users are up in arms.

Understanding Thursday’s fracas requires a brief history of why GameStop shot up 1,700 percent this month. It goes like this: Traders on the WallStreetBets forums on Reddit and Discord, inspired by a new GameStop board member and the opportunity to squeeze short sellers like Citron Research, funneled their disposable income into shares of the beleaguered retailer. The higher the stock price rose, the more the shorts had to buy to cover their losses, turning a snowball into an avalanche. The volume of trading suggests that some institutional investors may have hopped on as well. Even Elon Musk gave it a plug.

 

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