Amateur investors are responding with outrage after trading platforms restricted buying of shares in GameStop and other companies.
The moves by Robinhood and Interactive Brokers follow days of frenzied trading that led to massive gains for some stocks.
Shares in GameStop dived by as much as 60% after the restrictions.
It is the latest twist in a battle that has pitted amateur investors against Wall Street giants.
Major hedge funds had bet billions of dollars that GameStop’s shares would fall.
They have faced major losses after amateurs, swapping tips on social media sites such as Reddit, drove up the share price by more than 700% in a week.
Other firms, such as AMC Entertainment, Koss Corp and BlackBerry, also saw sharp gains. They were embraced by day traders after hedge funds bet against them.
The activity has drawn questions from regulators, who are monitoring trading amid fears of illegal actions.
But the amateur investors say they are just playing Wall Street at its own game.
In online forums they discussed legal action and accused Robinhood and other brokerages enacting their own form of market manipulation by restricting purchases of certain shares.
Why have GameStop shares surged?
Key to what’s going on is “short selling” or “shorting”, where a big investment company such as a hedge fund tries to make money by betting that a company’s share price will fall.
The hedge fund borrows shares in a company from other investors (for a fee) and sells the shares on the markets at, for example, $10 each, waits until they fall to $5, and buys them back. The borrowed shares are returned to the original owner, and the hedge fund pockets a profit.
GameStop – which saw heavy losses last year and was described as “failing” by one big investor – is the most shorted stock on Wall Street. Some 30% of its shares are thought to be in the hands of hedge fund borrowers.
However, in the last week, amateur investors who follow the Wall Street Bets forum on Reddit have poured money into buying the company’s stock with the aim of pushing up the price.
If the price rises dramatically, short sellers face big losses and they need to buy back the shares they have borrowed quickly to prevent bigger losses – a process known as covering.
However, buying back the shares only adds to demand for the stock and pushes its price higher still.
Amateurs aren’t the only ones getting in on the action.
This week, for example, private equity firm Silver Lake Group, which had loaned money to AMC Entertainment, converted its bonds to shares after the surge in the firm’s prices, a swap worth hundreds of millions of dollars.
In the US, anger over the trading restrictions united politicians whose stances typically sharply diverge.
Senator Sherrod Brown, a Democrat who is taking over as chair of the banking committee, said he would hold a hearing about the “state of the stock market”.
He said: “People on Wall Street only care about the rules when they’re the ones getting hurt.”
What is GameStop?
GameStop is an American high street shop that sells games, consoles and other electronics.
With fewer people out shopping due to the Covid-19 pandemic and most games being sold online, things weren’t looking great for GameStop.
People who buy and sell stocks often bet on which companies won’t do well in the future.
They borrow shares in the company and sell them, with a promise to buy them back at a later date.
If you’re sure the company will lose value, you’d make a profit when you buy them back and the price has fallen.
This is a massively simplified explanation of something called shorting, or short selling – words you might’ve seen cropping up in your feeds in the last few days.
GameStop was one of the companies that loads of hedge funds (companies who do these bets) had bet on to lose a lot of value.
More than four million people are on Reddit, usually discussing stocks and shares and where they’re going to invest money.
But huge numbers of people in the wallstreetbets Reddit forum swapped tips and bought shares in GameStop.
The demand raised its share price massively, which nobody saw coming, and everyone who had banked on it dropping in value had to buy their shares back.
Serena Williams has announced that she is engaged to Reddit co-founder Alexis Ohanian.
The tennis champ made the announcement, of course, on Reddit, in the form of a poem.
Serena Williams, 35, said Alexis Ohanian took her to Rome, where they first met, to propose to her – and she said “Yes”.
It caps off a year in which Serena Williams won her seventh Wimbledon singles title and 22nd Grand Slam singles title, but dropped to world number two ranking.
Reddit is a social media platform where users group around topics, news articles and discussion points, rather than around people they know in offline life.
Alexis Ohanian, 33, founded Reddit in 2005 alongside a college friend, Steve Huffman.
Serena Williams posted to r/isaidyes, a forum where users share their stories of wedding proposals, saying he had taken her to the table in Rome where they first met, where he got down on one knee and “said four words”.
One Reddit user responded by joking that the score was love-love.
Alexis Ohanian and Serena Williams had kept their relationship quiet on social media and in the world of celebrity gossip, but rumors began to circulate last year that they might be romantically linked.
Bobbi Kristina Brown has reportedly been evicted from her Atlanta home.
Bobbi Kristina Brown, 20, and her on-off boyfriend and “brother” Nick Gordon were said to be the subject of at least ten different noise complaints, leading up to her moving out.
A friend of a neighbor also revealed on Reddit that Bobbi Kristina Brown left an angry note for her neighbors following the supposed eviction.
The friend revealed: “My friend and his family live in the apartment under Bobbi Kristina Brown.”
“After 6 months of complaints, she was finally kicked out. He found this on his door today.”
However, on Wednesday, Bobbi Kristina Brown took to her Twitter account to deny that she had been forced out of her home.
“Awoke2CrazyNeighborStory(:” she wrote, adding: “Ichoose2move(: THEY were the nightmare.”
However, neighbor Joshua Morse seems to disagree, and spoke to 11alive about the note, which included foul language.
Bobbi Kristina Brown reportedly wrote: “Thank You for making a hard year harder. You are a miserable couple and always will be.”
Bobbi Kristina Brown has reportedly been evicted from her Atlanta home
It went on: “You were honored to have us living above you and you couldn’t stand such a young beautiful couple far more successful than you ever will be.”
“I pray your misery doesn’t rub off on your innocent little baby.”
Joshua Morse said he and his wife have filed at least ten different complaints about the noise coming from Bobbi Kristina Brown’s apartment.
He also revealed that Bobbi Kristina Brown has now turned in her keys and left the complex.
Bobbi Kristina Brown leaves angry note for neighbors as it’s claimed she was evicted from Atlanta home
Whitney Houston’s daughter lived in the apartment with Nick Gordon, who she reportedly split with romantically in November last year, after he tweeted: “@REALbkBrown and I are not engaged or dating. Just close like we have always been.”
Bobbi Kristina Brown attempted to defend her romantic relationship with Nick Gordon to her extended family on Lifetime’s The Houstons: On Our Own last year.
“We’re engaged,” she said on the episode as she showed of a ring that was once her mother’s.
“Everyone gets it wrong, I was never officially… it’s not incest.”
Nick Gordon was informally adopted by Whitney Houston when he was 12 years old.
Reddit has issued a public apology for its coverage of the Boston bombings.
Reddit’s Find Boston Bombers thread – known as a subreddit – named specific people standing near the scene as suspects.
The social news site included innocent people such as 17-year-old Salah Barhoun and missing 22-year-old Sunil Tripathi.
Reddit has admitted that it helped to fuel “online witch hunts”. The debacle has fuelled debate about how far such speculation should go in future.
“We all need to look at what happened and make sure that in the future we do everything we can to help and not hinder crisis situations,” the apology read.
“Though started with noble intentions, some of the activity on Reddit fuelled online witch hunts and dangerous speculation which spiraled into very negative consequences for innocent parties.”
It went on to apologize to the family of Sunil Tripathi.
Reddit has issued a public apology for its coverage of the Boston bombings
The family had to suspend the Facebook page they had created to find him because of the amount of negative comments they received. Sunil Tripathi’s name trended on Twitter and numerous news sites.
“We were very worried about Sunil and about each other because of how fast completely unsubstantiated claims were spreading,” said Sunil’s sister Sangeeta Tripathi.
“Our entire neighborhood and our house were surrounded by media trucks. On my personal cellphone I got 72 phone calls between 3 a.m. and 4.30 in the morning.
“We just really hope that something like what happened to our family – and it’s happened to a few other people in the same media frenzy
around Boston – doesn’t keep happening and that we are conscious of how powerful some of our platforms are.”
The tragedy in Boston created a huge amount of traffic on Reddit, peaking at about 272,000 users according to Google Analytics.
As well as attempting to solve the mystery of who the suspects were, Redditors – as contributors to the site are known – also organized housing for people stranded in Boston, sent pizza deliveries to police and hospitals, and organized “dog therapy” in local parks for traumatized residents.
The apology concludes: “After this week, which showed the best and worst of Reddit’s potential, we hope that Boston will also be where Reddit learns to be sensitive of its own power.”
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