Shares in US retailer GameStop have surged once more as online trading platforms lift restrictions temporarily placed on the army of armchair investors battling hedge funds and other short-sellers.
The stock jumped by more than 80% at Friday’s open – triggering a safety mechanism that halted trading temporarily – following sharp falls the day before as commission-free brokerages struggled to handle the volumes of trading and new customer requests.
Platforms including Robinhood, Trading212 and Interactive Brokers planned a return to normal operations on Friday as the assault on Wall St, which has seen retail investors collaborate in their millions via social media discussion boards, continued apace.
Amateur investors have been buying the shares this month to try to reap quick gains and impose losses on hedge funds and other so-called short-sellers who betted billions on the firm’s value falling.
Shares in the video game chain were up 1,744% by close of trading in New York on Wednesday – going from under $ 20 earlier in January to around $ 350.
But they slipped by 40% on Thursday as restrictions were imposed by the online platforms.
The price rose to $ 354 before the so-called circuit breaker was implemented in early Friday deals as brokerages got to grips with a flood of instructions.
However, one London-based brokerage Freetrade said that it had disabled buy orders for US stocks because its foreign exchange provider and bank had unexpectedly asked it to limit trade volumes.
The company had earlier used an interview with Sky News to say it was busy “educating” investors on the current market risks.
Robinhood, which was among those to face an angry backlash from customers when it pulled trading, was reported by the New York Times to have raised $ 1bn in emergency funding late on Thursday to meet demand.
The astonishing share price gains have caused US regulators to review the activity as concerns mount over the growth in retail investors – non-market professionals – coordinating a strategy online.
The Securities and Exchange Commission warned market participants ahead of Friday’s dealing that they must be careful not to break rules covering the “manipulation” of stocks and that issuers meet their compliance requirements.
The UK’s Financial Conduct Authority told Sky News on Thursday that it was monitoring the situation.
The volatility of recent days is expected to continue.
It has gripped the wider markets because hedge funds and others to have lost heavily on their positions have been selling other stocks to cover their losses.
The activity has been blamed for jitters globally in recent days.
It has pitted stock market professionals against the armchair investor, whose numbers have swelled during the coronavirus crisis as they seek to make their money work for them at a time of ultra-low interest rates.
US politicians are to mount an inquiry amid fears that the tidal wave of investor activism could pose a threat to the financial system.
However, some joined criticism of online trading services that restricted small investors trading GameStop and shares in other companies including Nokia and Blackberry – which also saw strong rises in their US-listed shares on Friday.
Democrat representative Alexandria Ocasio-Cortez said the decision to suspend dealing by Robinhood, arguably the most high profile zero-commission platform, was “unacceptable” and that she would support a hearing on why it blocked small investors while rich financial institutions “are freely able to trade the stock as they see fit”.
The CEO of Robinhood – whose company’s aim is to “democratize” investing and has about 13 million users – said it had acted “pre-emptively” to safeguard the business and its customers from potential losses.
Vlad Tenev also told CNBC that the move had not been prompted by any hedge fund.
The surge was partly fuelled by people sharing ideas on sites such as Reddit – namely the wallstreetbets board – as well as private Facebook groups such as “Robin Hood’s Stock Market Watchlist”.
That platform was taken down by Facebook on Friday which cited violations of its operating conditions for the move.
One investor posted screengrabs on Reddit suggesting he had turned an initial investment of $ 53,566 (£39,061) into one worth more than $ 25m (£18.2m) at one point this week.
Adding to the joy of those investors – which includes another group on the social media platform TikTok – has been the discomfort of those on the losing side of the trade.
Short-sellers are loathed by many private investors for the positions they take against some businesses and, in the process, contributing to falls in their share price.
Many of these are hedge funds and a number of them have been caught out badly by the surge in GameStop shares.
Happiness at tweaking the tail of these short-sellers is not, however, confined to the small investors on Reddit, Facebook and TikTok.
Another recent tweet of his has been credited for driving up the cost of Bitcoin by 13%.