In 2001, my sister and I were getting into stocks. My father had been a long-time player in the stock market and suggested we buy stocks to help us learn about the process. I suggested some goodies, like TIVO and some other tech stocks, however, my sister went for a safer bet: Barnes and Noble, which I bought into as well. Sometime after Barnes and Nobel spun off GameStop, I ended up with a few shares of the company at about $5 a share, give or take. Those stocks have sat untouched in an account for the better part of the last two decades. That is of course, until last night when my dear mother reminded me that I still owned GameStop, which I promptly sold this morning. (Thanks Reddit!)
During the tumultuous last few days for GameStop, numerous people jumped on small-investor-friendly apps to be able to join in on the rush on the stock. As the rush forced hedge funds to buy the stock at a higher price to cover their own potentially questionable stock manipulations, the stock price soon jumped to astronomical levels of over $450 this morning.
Shortly after the stock reached that level, Robinhood and Ameritrade both announced they were essentially suspending trading of GameStop and several other stocks that had the prices driven up through mass-small-investor action. As a result of the sudden withdrawal of the purchasing power of those small investors, the price for GameStop collapsed, to about $125. (There may have also been massive dumping for shorts – 700k shares – which contributed to the tanking of the price) It is currently trading between $230 and $250.
Now comes news that Robinhood went further than just freezing trades on GameStop; They have allegedly begun force-selling investors’ shares. On Twitter, investors began sharing their stories of being notified that their shares of GameStop were being sold without their direction or permission, presumably as a result of Wall Street’s complaints that the actions from Robinhood investors was causing the problem for the market and more traditional investors.
In case you aren't following the Reddit/WallstreetBets/$GME stock market madness, @RobinhoodApp is now selling off many Redditors' shares *whether they want to sell them or not.* https://t.co/80epBFI2Ov
— Max Burns (@themaxburns) January 28, 2021
Additionally, a person claiming to be a Robinhood employee stated on Reddit that the directions to close trading came from Wall Street and the Biden White House.
The white house is implicated in all of this now pic.twitter.com/Klt8okKIXZ
— Jason Rinehart (@Jrinehart96) January 28, 2021
Now others, including RedState’s own Kira Davis, have attempted to close out their accounts to voice their displeasure with Robinhood’s actions by taking their business elsewhere. According to multiple reports though, Robinhood has prevented the sale of most stocks on their site, which essentially prevents these small investors from closing their accounts. This is potentially illegal.
As a result of Robinhood’s actions, a class action lawsuit was filed in New York against the investor app, claiming that Robinhood’s actions denied these retail investors of access to the open market.
— Lydia Moynihan (@LJMoynihan) January 28, 2021
This link worked for me:https://t.co/SlNM1IumSG
— David Schwartz (@JoelKatz) January 28, 2021
Additionally, there are now accusations that Citadel, an alleged major investor in Robinhood, may have also had something to do with the freeze on trading on Robinhood, as Citadel was likely facing pressure from other investment firms to put an end to the small-investor driven chaos.
This story is far from over and you can expect there will be a lot of fallout in the coming months from today’s drama. Rest assured there is enough bipartisan outrage that will likely lead to investigations in both the House and the Senate, if not from the SEC itself.