Wall Street’s wild ride amid a Reddit-fueled GameStop boom continued Thursday, as the renegade traders behind it boosted other businesses, including American Airlines, online trading platform Robinhood froze some transactions and short-sellers reported about $70 billion in losses so far this year.
The tumult began when financial advice YouTuber Roaring Kitty encouraged amateur traders, many associated with the Reddit forum r/WallStreetBets, to pump money into ebbing companies like video game retailer GameStop, in a shot across the bow at large hedge funds shorting the businesses.
Amid the market turmoil, the store’s stock jumped violently Thursday from a peak of $482.85 to a valley of $112.25, a wild swing of $370.60 in a matter of hours.
When the markets closed at 4 p.m., GameStop settled around $197 — after closing Wednesday around $345.
Despite the turbulence, however, the Dow Jones Industrial Average and S&P 500 both finished up by about one percent.
Other companies the online kingmakers invested in included AMC movie theaters, BlackBerry, Nokia, swimwear line Naked Brand Group, headphone manufacturer Koss and Bed, Bath & Beyond.
Also benefitting — albeit unintentionally — was tiny Australian mining company GME Resources, evidently bolstered by investors confused because it and GameStop have the same ticker on their countries’ respective markets: GME.
But early Thursday, Robinhood pumped the brakes, freezing its users’ ability to buy stocks in GameStop and the other largercompanies and eating into the gains.
The Robinhood shutdown quickly provoked the ire of the amateur investors, and a class-action lawsuit was brought against the platform by users.
It also made for strange bedfellows, as voices ranging from conservative Texas Sen. Ted Cruz to self-described democratic socialist Rep. Alexandria Ocasio-Cortez blasted the restriction.
“This is unacceptable,” tweeted Ocasio-Cortez, a Democrat representing parts of Queens and The Bronx. “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.”
She went on to say that, as a member of the House of Representatives’ Financial Services Committee, she would support a hearing into the selective suspension of trading.
“Inquiries into freezes should not be limited solely to Robinhood,” she wrote. “This is a serious matter. Committee investigators should examine any retail services freezing stock purchases in the course of potential investigations – especially those allowing sales, but freezing purchases.”
The Republican Cruz — typically at the opposite end of the political spectrum from Ocasio-Cortez — retweeted her thread, writing, “Fully agree.”
Dave Portnoy, the outspoken founder of sports and pop culture site Barstool Sports, also weighed in.
“So @RobinhoodApp is saying they are protecting their users from over leveraging and getting burned,” wrote Portnoy. “But somehow it’s okay when hedgefunds literally do the same exact thing. Nobody had a problem then until the hedge funds lost. Now speculating is a huge issue. #frauds”
Additionally chiming in with advice for GameStop investors was rapper Ja Rule.
“Yo this is a f–king CRIME what @RobinhoodApp is doing,” he wrote. “DO NOT SELL!!! HOLD THE LINE… WTF”
And Daily Show host Trevor Noah released a video explaining the dizzying sequence of events — his face superimposed onto the bathing body of actress Margot Robbie from her turn in “The Wolf of Wall Street.”
Despite the protests, the move succeeded in edging the market back towards the status quo, as prices of shares in all the companies plunged back down toward earth by mid-day.
However, the chaos still put a sizable dent into large traders’ short-selling numbers.
Such traders were, as of Thursday, staring down the barrel of estimated losses of $70.87 billion on their short positions in American companies so far this year, according to data analytics firm Ortex, with a fair chunk of that hit tied to the GameStop rush.
Among those hit was Gabe Plotkin, the head of Melvin Capital Management and a former protege of Wall Street wizard-turned-Mets’ owner Steve Cohen.
Plotkin’s portfolio was reportedly down some 30 percent as of Tuesday, leaving him in need of a $2.75 billion cash infusion from hedge fund hotshot Ken Griffin, of Citadel.
The topsy-turvy trading has rankled others within the Wall Street establishment, including Andrew Left, the founder of Citron Research and a renowned short-selling guru.
As Left caught wind of the rising GameStop stocks last week, he warned investors not to buy into the hype on the company.
His advice seemed to have the opposite effect, further propelling investments into the company by defiant Wall Street outsiders.
With Wires