The GameStop/Reddit fustercluck has escalated further and now involved Robinhood somehow, so here’s an explainer on it all.
So in case you haven’t heard yet, there’s a wild mess going on involving Reddit (as it usually does), struggling US video game chain GameStop, and some pretty pissed off billionaires.
To quickly sum up what’s gone on so far in bullet point form:
- GameStop had a new member join its board (whose investment firm already had a 10% stake in the company already) and his tactics resulted in stock commentators predicting large stock price drops for the company.
- Redditors over at the r/wallstreetbets subreddit got pretty cheesed off at this news and started a joke-y counter narrative of “GameStop share prices are better than ever!”
- These jokes got way out of hand as investors took these Reddit jokes seriously and began buying up GameStop shares, causing the company’s stock prices to soar over 1,000 percent in the past week.
- This in turn put those who shorted GameStop shares – that is those who bet on GameStop to fail – in major trouble as this rise in the company’s stock prices meant that they’ll end up losing a shitload of money.
For a better explanation than the one I just gave, ABC News has a great little explainer on the various terms used and the specifics of what’s happening.
It’s a pretty messy yet also hilarious fustercluck brought on by Redditors who just wanted to screw with billionaires.
So how does Robin Hood (spelled Robinhood in this context) fit into this whole GameStop/Reddit mess?
Well in the days after all this kicked off, things have escalated further as the hype over GameStop on Reddit has spilled out over to other companies like Nokia, BlackBerry, and AMC Entertainment.
The dramatic jumps in stock prices of all these companies has drawn scrutiny from the US government and regulatory bodies.
Since this is a messy and volatile situation, popular stock trading app Robinhood – which has many users who own GameStop stock – has blocked users from buying more GameStop stock due to “recent volatility.”
“We continuously monitor the markets and make changes where necessary,” the company wrote in a blog post. “In light of recent volatility, we are restricting transactions for certain securities to position closing only, including $AMC, $BB, $BBBY, $EXPR, $GME [GameStop], $KOSS, $NAKD and $NOK. We also raised margin requirements for certain securities.”
Unsurprisingly, Robinhood users were pretty pissed off at the apps decision to block users from trading stocks, arguing that it’s being done to protect Wall Street’s interests and noting the irony of an app named after Robin Hood protecting the rich at the expense of the poor.
Hell, even Alexandria Ocasio-Cortez criticised the decision.
Robin Hood: a parable about stealing from the rich to give to the poor
Robinhood: an app about protecting the rich from being short squeezed by the poor
— Jake Chervinsky (@jchervinsky) January 28, 2021
This is unacceptable.
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.
As a member of the Financial Services Cmte, I’d support a hearing if necessary. https://t.co/4Qyrolgzyt
— Alexandria Ocasio-Cortez (@AOC) January 28, 2021
So what happens next? Well some pissed off Robinhood users are planning to sue the company for limiting their trading options (as per Yahoo) while this GameStop/Reddit fustercluck continues to unfold.
Beyond that, I have no clue as everything has happened so quickly that it’s been tough to keep track of what’s happening on all fronts.
What started as a joke on Reddit has escalated and mutated into something else entirely so we’ll just have to wait and see where this whole mess ends up.