The GameStop saga turns into a soap opera, with its share of twists and improbable characters. Since the beginning of the year, the action of the American video game seller has soared, supported by an army of stock marketers and inflicting billions of losses on large hedge funds who had bet on its fall.
In the midst of this clash, Robinhood, the favorite brokerage site of these small investors, is accused of having taken up the side of the Wall Street giants when it decided Thursday to limit purchases of GameStop stock. President Biden’s financial advisers say they are following the case closely and parliamentarians are calling for an investigation. The lifting of these restrictions on Friday boosted the share’s rise, as some call on small holders to take profit, before everything collapses.
Main character of this stock market saga, the obscure chain of video game stores ticks all the wrong boxes: little present online, GameStop sells its products in shopping centers, which the pandemic has finished emptying. Believing that its stock market value was going to collapse, hedge funds bet heavily on the decline in its share. But its price has increased 20-fold since armies of small investors banded together to buy GameStop.
Side twists, GameStop momentarily reached the record value of 33.7 billion dollars Thursday, six times more than a week earlier. The stock jumped 83% at the opening of Wall Street, before triggering a listing hiatus and then falling by 44%. Meanwhile, Robinhood had placed restrictions on purchases of 13 stocks accustomed to roller coasters of late, including AMC Entertainment (quadrupled Thursday), Koss (increased from $ 4 to $ 90 since Monday) and of course GameStop. Other online brokers like Charles Schwab and TD Ameritrade took similar action between Wednesday and Thursday.
In addition, Robinhood had to deposit $ 1 billion in additional liquidity with a clearing house responsible for ensuring the proper performance of trade, worried about the level of risk in the markets.
Fury of the “day traders”
The restriction on purchases sparked the fury of stock market followers of the Reddit message site. For them, Robinhood defended the interests of the losing hedge funds on GameStop, because the sale of these 13 stocks remained possible while the purchases were limited. The situation has become all the more ironic as the brokerage site has set itself the mission of democratizing finance for all, which had precisely attracted the support of “day traders” in love with GameStop.
Robinhood has also come under criticism from several US parliamentarians, including Republican Senator Ted Cruz, some going so far as to accuse the platform of market manipulation. The SEC itself, the policeman of US markets, backed down to say on Friday that it was investigating the trading restrictions, in order to establish whether they had penalized certain types of investors.
The lifting of limits on purchases of 13 stocks on Friday coincided with a resumption of the rise of GameStop, which was worth $ 352.01 at 6 p.m. Swiss time, + 78% on the day. It was also Friday that Citron Research announced that it would no longer publish analysis on companies considered to be overvalued or manipulated.
Citron Research Stops Short Selling Research After 20 years of publication, Citron will no longer be publishing “short reports”. We will focus on providing long side multibagger opportunities to individual investorshttps://t.co/gP9HXzo7Nf
– Lemon Research (@CitronResearch) January 29, 2021
On January 19, the company, which is also investing (and has lost massively on GameStop), said the stock would drop, setting off the stock market storm of the past few days. Finally, TV host Jim Cramer, who provides investment advice on CNBC, urged stock marketers to take their profits on GameStop: “You’ve already won,” he said on Friday.