Robinhood, a popular stock trading platform among amateur investors, blocked its users from buying shares of GameStop, AMC and several other companies Thursday following sudden and sharp increases in value.
Robinhood said in the morning that it was restricting investors from acquiring the shares and allowing them only to sell. After the market closed for trading, the company said “we plan to allow limited buys of these securities” beginning Friday but it will “continue to monitor the situation and may make adjustments as needed.”
GameStop shares plunged 44% to $193.60 on Thursday, while AMC shares fell 47% to $8.63. But GameStop and AMC shares jumped 36% and 22% in after-hours trading shortly after 5 p.m. following the Robinhood update.
Just as it restricted GameStop and AMC trading, Robinhood applied the same restrictions to the stocks of several other companies, including fashion retailer Express, home goods retailer Bed Bath & Beyond, headphone maker Koss and tech company BlackBerry.
“Amid significant market volatility, it’s important as ever that we help customers stay informed,” Robinhood said in a blog post, adding “we fundamentally believe that everyone should have access to financial markets.”
The move drew swift condemnation from some of the platform’s previously vocal advocates, including investors who are seeking to capitalize on a massive wave of interest in struggling companies whose stocks had been shorted by sophisticated investors.
One investor, Brendon Nelson of Menlo Park, California, on Thursday filed a lawsuit seeking class action status against Robinhood, accusing the company of depriving investors of the chance to reap earnings from GameStop shares.
New York Attorney General Letitia James confirmed Thursday in a press release her office would look into the matter. “We are aware of concerns raised regarding activity on the Robinhood app, including trading related to the GameStop stock,” she said.
GameStop and AMC stocks have enjoyed huge upswings in value in recent days as retail investors rallied on message board platform Reddit to drive up the price of stocks to hurt Wall Street investors, such as hedge funds, that had bet against the shares.
Retail investors take on hedge funds:Why did shares of GameStop and AMC soar?
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Robinhood has been at the center of attention during this movement in no small part because the company, which takes its name from a character who stole from the rich to give to the poor, has increased in popularity by appealing to average investors, including newcomers.
“Our mission at Robinhood is to democratize finance for all,” the company said Thursday. “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.”
But the company’s move came under attack Thursday from a wide variety of people.
“You are scam artists. You are crooks. You deserve to be behind bars and you know it,” Barstool Sports founder and investor Dave Portnoy said on Twitter in a message directed at Robinhood.
During a CNBC interview Thursday evening, billionaire Leon Cooperman said, “The reason the market is doing what it’s doing is people are sitting at home getting their checks from the government. And this fair share is a (expletive) concept. It’s just a way of attacking wealthy people and I think it’s inappropriate. We all gotta work together and pull together.”
Copperman, who said he held no position on GameStop added, “I’m not damning them. I’m just saying from my experience, this will end in tears.”
GameStop was trading above $450 a share Thursday morning, more than double its close of $147 on Tuesday. At the start of 2021, shares of GameStop closed at $17.25 on Jan. 4. Since then, shares have surged more than 1,000%, compared with just a 1% rise in the S&P 500, the broader benchmark for most mutual funds.
The primary reason for the surge? Smaller investors who have banded together in places like Reddit, under the subreddit r/WallStreetBets.
And it’s not just GameStop. Shares of AMC Entertainment jumped more than 230% Wednesday as the Twitter trend #SaveAMC spread amid concerns the movie theater chain might file for bankruptcy due to the COVID-19 pandemic keeping moviegoers away.
After it reversed its decision to halt trading on certain shares Thursday, Robinhood defended the move as a “risk-management decision” and hinted that it was due to regulatory issues.
“As a brokerage firm, we have many financial requirements, including SEC net capital obligations and clearinghouse deposits,” the company said in a new blog post. “Some of these requirements fluctuate based on volatility in the markets and can be substantial in the current environment. These requirements exist to protect investors and the markets and we take our responsibilities to comply with them seriously, including through the measures we have taken today.”
Contributing: Brett Molina
Follow USA TODAY reporter Nathan Bomey on Twitter @NathanBomey.
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