Robinhood, the free stock trading app that Reddit traders used to buy shares of GameStop, resulting in an intense stock surge, has banned trading the retailer’s shares, as well as shares of several other companies targeted by r/WallStreetBets, halting GameStop’s meteoric rise.
Discord, an independent VoIP and instant messaging service largely used by gamers, also banned members of r/WallStreetBets for “hate speech” after the group migrated to Discord servers following a brief Reddit outage.
“Self-described as ‘like 4chan found a Bloomberg Terminal,’ the Wall Street Bets (WSB) trading community on Reddit wreaked chaos in traditional markets after pumping GameStop (GME) nearly 900% in five days to around $380 Wednesday morning. And the mayhem is spreading,” CoinDesk reported Wednesday. “Other heavily shorted stocks such as BlackBerry (BB) and AMC Entertainment (AMC) have seen triple-digit percentage gains in the past couple weeks as WSB traders set their sights on these companies. Even Eastman Kodak (KODK) shot up nearly 50% Wednesday, briefly trading near $14 after closing trading on Tuesday below $9.50.”
As The Daily Wire reported earlier Thursday, the GameStop stock surge was orchestrated by Redditors looking to send a message to Wall Street hedge fund managers engaging in short selling. “GameStop started in January valued at $17.25 and had been heavily “shorted,” meaning many Wall Street hedge-fund short-sellers expected the firm to collapse and the value to plunge with it,” The Daily Wire noted.
So far, the Redditors are succeeding, according to CNBC. “Hedge fund Melvin Capital closed out its short position in GameStop on Tuesday after taking huge losses as a target of the army of retail investors. Citadel and Point72 have infused close to $3 billion into [Melvin Capital] to shore up its finances.”
Trading services and government regulators, though, have been vocal over their concern for “market volatility” related to the stock surge, and Wall Street’s hedge fund bankers seem to be panicking, based on social media posts decrying Robinhood’s democratization of the stock-trading process.
In at least two cases, it appears so-called “Big Tech” forces are firing back, though it’s not immediately clear whether their actions are at the behest of either government or Wall Street forces.
Wednesday night, after moderators of r/WallStreetBets briefly took the subreddit private, allowing only invited users to participate, members of the group migrated to Discord’s instant messaging service. Just a few short hours later, Discord banned the group, citing violations of its “hate speech” policy, according to Ars Technica.
“Discord was the first to act, shutting down the WSB server sometime around 6 pm,” the outlet reported. “In a statement provided to the press, the social media service said the WSB Discord server ‘has been on our Trust & Safety team’s radar for some time due to occasional content that violates our Community Guidelines, including hate speech, glorifying violence, and spreading misinformation. Over the past few months, we have issued multiple warnings to the server admin.'”
“The statement goes on to specifically clarify that the move was not ‘due to financial fraud related to GameStop or other stocks. Discord welcomes a broad variety of personal finance discussions, from investment clubs and day traders to college students and professional financial advisors,'” Ars Technica noted.
The Verge confirms that some users were “spamming” the server with “hateful language,” but it appears the server existed for several months before Discord took action and that Discord had previously warned some users, leaving others to question Discord’s timing, suddenly shutting down the service at the height of the stock surge.
Thursday morning, free investing app Robinhood, which most Reddit traders were using for their stock transactions, announced it had halted trading on GameStop shares, as well as for several other companies, because of market “volatility.” Stock trades were halted and purchases canceled, effectively reversing GameStop’s meteoric rise.
“We continuously monitor the markets and make changes where necessary. In light of recent volatility, we are restricting transactions for certain securities to position closing only, including $AAL, $AMC, $BB, $BBBY, $CTRM, $EXPR, $GME, $KOSS, $NAKD, $NOK, $SNDL, $TR and $TRVG. We also raised margin requirements for certain securities,” Robinhood said in a statement.
CNBC noted that the provision raising “margin requirements” effectively prohibits new and casual users of the app from making trades by requiring users have a certain amount of money in their brokerage account to participate in trading. Both Charles Schwab and TD Ameritrade raised their margin requirements for certain stocks, including GameStop, on Tuesday.
Interactive Brokers, another free stock trading system, issued their own statement:
As of midday yesterday, Interactive Brokers has put AMC, BB, EXPR, GME, and KOSS option trading into liquidation only due to the extraordinary volatility in the markets. In addition, long stock positions will require 100% margin and short stock positions will require 300% margin until further notice. We do not believe this situation will subside until the exchanges and regulators halt or put certain symbols into liquidation only. We will continue to monitor market conditions and may add or remove symbols as may be warranted.
“Free-stock trading pioneer Robinhood and Interactive Brokers said that in some cases, investors would be able to sell only their positions and not open new ones. Both brokerages raised margin requirements on certain securities,” CNBC reported.
“After the announcement, shares of GameStop initially reversed their gains, sliding quickly into negative territory,” the outlet continued. “The stock, which traded above $500 at one point in premarket trading, was below $290 per share shortly after the opening bell. About two hours after the Robinhood announcement, GameStop was down 50% from Wednesday’s closing price.”
Robinhood users took to Twitter to accuse the app of locking out traders at the behest of Wall Street bigwigs.
“Either #Robinhood allows people to trade freely in the market or they will lose millions of users #ToTheMoon #GME #AMC #NAKD,” one user complained.