However, the company’s share price rallied later when Robinhood said that it would allow “limited buys” of the securities
GameStop shares have sunk as trading platforms including Robinhood and Interactive Brokers restricted trading in the video game retailer along with AMC Entertainment, Blackberry and other stocks that soared this week in a social media-driven trading frenzy that shook stock markets.
GameStop, the US video game chain whose 1,700 per cent rally has been at the heart of a battle between small scale “retail” investors and hedge funds over the past week, lost half its value in early trading.
Having finished Wednesday’s session at $US347.51 a share, GameStop plunged to $US265 when the New York Stock Exchange opened last night, ending the day down 44 per cent at $US193.60.
However, the company’s share price rallied in after-hours trade when Robinhood released a statement after the NYSE’s close saying that it would allow “limited buys” of the securities it had suspended from trade.
Starting tomorrow, we plan to allow limited buys of these securities, the company announced on its “Under the Hood” blog. We’ll continue to monitor the situation and may make adjustments as needed.
GameStop shares had previously jumped more than 1,000 per cent in the past week, driven primarily by retail investors trading on online apps and sharing tips on social media messaging boards.
Such gains have forced short-sellers to buy back stock to cover potential losses in what is dubbed a “short squeeze”.
On Reddit board WallStreetBets, where calls to buy stocks have helped drive the extraordinary moves, some of its more than 4 million members reported trading platform Robinhood was now preventing investors from buying GameStop and other volatile stocks.
In a statement on its website, Robinhood said the restrictions were necessary to comply with Securities and Exchange Commission financial requirements given the recent volatility in these stocks. It said restricted stocks also included BlackBerry, Koss and Express.
It was quickly hit with a class-action lawsuit alleging that as many as 10 million people may have “lost out on earnings opportunities” as a result of Robin Hood’s move.
Interactive Brokers, another online trading platform, also said it was restricting trading in those stocks.
