Investing Apps Attempt to Derail Reddit Rout of Wall Street
Are class action lawsuits coming?
The internet, in and of itself, is the sort of tool that few of us really understood the gravity of when we first wielded its power. It’s like the chef who’d never been cut with a knife not fearing the knife. But now, the hive mind is rooting out cheat codes that have existed in our system for decades, exploiting them, and burning down Wall Street in the process.
After weeks of internet chatter about the love of GameStop – a failing video game franchise that Wall Street hedge funds believe was about to go belly-up – people began buying their stock again. These hedge funds had shorted the stock to the tune of 140%, with not a whole lot of stock out there still to be bought. This meant that, as GameStop stock went higher, these hedge funds were being forced to buy back what they loaned out at higher prices as well, further driving $GME skyward.
Then, as hedge funds began to vanish on Thursday, Wall Street bit back…and hard.
GameStop’s stock has continued to make big moves, briefly crossing $450 a share on Thursday, fueled by Reddit users collectively taking on the Wall Street establishment. But individual investors looking to make trades have faced multiple issues on trading sites and apps over recent days, with many experiencing service disruptions, according to Bloomberg. The frenzy over GameStop stock has led to TD Ameritrade and Robinhood restricting new purchases of particular stocks (GameStop and AMC, among others). It also led to the Wall Street Bets subreddit temporarily getting locked and a Discord server getting shut down for violating terms of service.
On Thursday morning, Twitter users began posting screenshots of their Robinhood app that showed a message appended to the stocks of GameStop, AMC, Nokia and Bed, Bath and Beyond: “This stock is not supported on Robinhood.”
Robinhood explained the move in a blog post Thursday morning, just before the stock exchanges opened: “In light of recent volatility, we are restricting transactions for certain securities to position closing only, including $AMC, $BB, $BBBY, $EXPR, $GME, $KOSS, $NAKD and $NOK.”
Other companies began following suit, including Stash – another once popular investing app.
There has been plenty of talk about class action lawsuits as well, which could force some of these companies to think twice.
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