See updates through February 2, 2021, at end of post.
So a curious thing happened when a bunch of Reddit users got together and counteracted a move by hedge funds to “short” stocks in GameStop and a few other companies,[1] essentially doing to hedge funds what those same funds routinely do to ordinary investors[2] and forcing the funds to cover their positions at an estimated cost approaching $71 billion.[3] Robinhood, an app that apparently enables users to trade in fractions of shares, and other platforms clamped down, restricting the trades and sparking howls about hypocrisy.[4] (Robinhood has now partly rescinded its freeze, claiming, unconvincingly to some, that its actions were necessary to comply with federal requirements.[5]) Read more
- [1]Matt Phillips and Taylor Lorenz, “‘Dumb Money’ Is on GameStop, and It’s Beating Wall Street at Its Own Game,” New York Times, January 27, 2021, https://www.nytimes.com/2021/01/27/business/gamestop-wall-street-bets.html↩
- [2]Eric Levitz, “Robinhood Banning GameStop Proves the Free Market Is a Lie,” New York, January 28, 2020, https://nymag.com/intelligencer/2021/01/robinhood-ban-gamestop-share-price-explained.html↩
- [3]Sujata Rao, “Losses on short positions in U.S. firms top $70 billion – Ortex data,” Reuters, January 28, 2021, https://www.reuters.com/article/us-retail-trading-shortbets-idUSKBN29X1SW↩
- [4]Eric Levitz, “Robinhood Banning GameStop Proves the Free Market Is a Lie,” New York, January 28, 2020, https://nymag.com/intelligencer/2021/01/robinhood-ban-gamestop-share-price-explained.html; Hamza Shaban, “GameStop stock roars back after Robinhood lifts trading freeze,” Washington Post, January 29, 2021, https://www.washingtonpost.com/business/2021/01/29/gamestop-stocks-robinhood-reddit/↩
- [5]Hamza Shaban, “GameStop stock roars back after Robinhood lifts trading freeze,” Washington Post, January 29, 2021, https://www.washingtonpost.com/business/2021/01/29/gamestop-stocks-robinhood-reddit/↩