GameStop stocks come crashing down — company loses $27 billion of market value



GameStop, the company at the center of the Reddit retail investor uprising against hedge funds, lost $27 billion of its market value on Tuesday after their stock crashed back down to Earth.

The stock price of the video game retail store had soared to a dizzying high of $347.51, skyrocketing the value of the company and costing billions to hedge funds that had bet against the company.

By Tuesday, the stock value crashed to $90 per share, less than a third of the top value and the company had lost $27 billion of market value, according to the Los Angeles Times.

The battle between the Reddit crowdsourced retail investors and the professional investor class seized headlines after some complained of market manipulation when a popular stock market app restricted users from buying the stock. Robinhood's CEO later denied accusations that he was trying to help the hedge funds by shutting down trading.

Critics called for Robinhood to be investigated over the incident, while others were satisfied with the explanation from the CEO that the company needed to shore up its capital amidst historically high volatility in the market.

Despite the value of GameStop falling precipitously from its high, its $90 price tag is still many times higher than its value of $4 per share a year before the "short squeeze" campaign by retail investors.

While some have called the crowdsourced uprising from retail and amateur stock traders against the professional investor class a David and Goliath story, others have noted that there are signs other hedge funds were able to cash in on the rebellion.

One hedge fund that reportedly lost billions over their bet against GameStop simply obtained a bailout from another hedge fund, and other companies appeared to buy in to the stock on the way up and profited by its rise.

Ortex, a market data analysis company, said the Reddit investor rebellion signaled a shift of power in the investment community.

"Regardless of the final outcome, the GameStop saga points to an increasing democratization of the markets, with fairer access and a more level playing field," the company said in a blog post. "The information advantage that has maintained the status quo for so long is crumbling, and that has far-reaching consequences for investing, markets and the industry itself."

The broader market saw large gains Tuesday.

Here's more about the GameStop Reddit uprising:

GameStop stock extends losses in sell offwww.youtube.com

Class action lawsuit filed against Robinhood after GameStop trade freeze



A federal class action lawsuit was filed Thursday against the stock trading company Robinhood after it restricted its customers from buying shares of GameStop and other stocks popularized on the Reddit forum WallStreetBets.

BREAKING: Class action complaint against @RobinhoodApp filed in the southern district of NYhttps://t.co/DuGP3LIQDQ https://t.co/mw82RRoA2L
— Lydia Moynihan (@Lydia Moynihan)1611853246.0

Attorney Alex Cabeceiras filed the lawsuit in the Southern District of New York on behalf of plaintiff Brendon Nelson, a Massachusetts resident. On Thursday, Nelson said he logged into his Robinhood account and discovered that GameStop's stock had disappeared from the app. Robinhood also prevented users from buying more shares of it.

The complaint filed by Cabeceiras argues "Robinhood purposefully, willfully, and knowingly removing the stock 'GME' from its trading platform in the midst of an unprecedented stock rise thereby deprived retail investors of the ability to invest in the open-market and manipulating the open-market."

This morning I filed a class action lawsuit against Robinhood for negligence and breach of fiduciary duty, among ot… https://t.co/Fp5pbNLvYO
— Alex Cabeceiras (@Alex Cabeceiras)1611851641.0

The lawsuit demands that the court immediately issues an injunction forcing Robinhood to reinstate GameStop's stock on its platform. Additionally, it seeks a class action fee for all Robinhood users prevented from trading GameStop, an award for attorney's fees, and punitive damages.

The Daily Beast reported that another law firm, ChapmanAlbin, announced in a statement Thursday that it was "investigating claims on behalf of Robinhood users that were affected and suffered losses as a result of investing in Gamestop or AMC."

"Robinhood appears to be up to the same old tricks, recruiting social media influencers to encourage individuals to sign up and fund a Robinhood account and beginning purchasing shares of securities such as GameStop and AMC, with no consideration as to the suitability of the purchases," ChapmanAlbin attorney Philip Vujanov said.

Robinhood and other stock brokers' decision to ban trading of GameStop comes after retail investors on the popular forum WallStreetBets began a campaign to buy the stock amidst news that several hedge fund investors were attempting to short it for a profit. WallStreetBets boasts over two million users on its discussion board. The organic campaign to create artificial demand for GameStop stock successfully caused its price to rise more than 1,000% over one week, forcing short sellers to buy back into the stock to cover their potential losses.

This process, known as a short-squeeze, caused short sellers to lose an estimated $70.87 billion while the retail traders who bought into GameStop have seen the value of their shares increase dramatically.

The decision to ban trading of GameStop and other shorted stocks by Robinhood, WeBull, Interactive Brokers, and other stock trading companies was received by their customers as a statement that these services will prioritize the interests of Wall Street hedge funds over decentralized, individual traders. Lawmakers in both parties have now called for congressional investigations on the trade freeze, probing whether Robinhood and others acted unfairly by shutting retail traders out of the market while permitting credentialed Wall Street investors to trade as they please.

Republicans and Democrats slam Robinhood, call for congressional hearings on GameStop trade freeze



Democratic lawmakers are calling for hearings into Robinhood and other financial service companies' decision to prohibit customers from buying or even searching for certain stocks, and some Republicans are signaling support for the effort.

Popular stockbroker services were accused of manipulating the market by angry social media users Thursday after Robinhood, a company that lets customers trade stocks for free from their mobile phones, announced that shares in GameStop, AMC Entertainment, Nokia, and other "volatile" stocks would be restricted to position-closing only. The decision came in response to an internet campaign by retail traders — non-professional individual investors who day trade to make money on the side or for fun — to attempt to raise the stock price of GameStop after hedge funds signaled their intent to short the stock.

Motherboard reported Thursday that more than half of the users on Robinhood owned at least some GameStop stock and were now blocked from buying more. Needless to say, the outcry from Robinhood customers and other GameStop traders was near instantaneous and furious, but now lawmakers are weighing in.

Rep. Rashida Tlaib (D-Mich.) called the move by Robinhood and others "absurd," demanding a hearing in Congress on the issue.

"They're blocking the ability to trade to protect Wall St. hedge funds, stealing millions of dollars from their users to protect people who've used the stock market as a casino for decades," Tlaib tweeted.

This is beyond absurd. @FSCDems need to have a hearing on Robinhood's market manipulation. They're blocking the abi… https://t.co/RIfngcIg1P
— Rashida Tlaib (@Rashida Tlaib)1611846204.0

She was joined by Rep. Alexandria Ocasio-Cortez (D-N.Y.), another member of the progressive "Squad" in Congress and a member of the House Financial Services Committee.

"This is unacceptable," Ocasio-Cortez said. "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."

She added in a follow-up tweet that any congressional inquiry "should not be limited solely to Robinhood."

"This is a serious matter. Committee investigators should examine any retail services freezing stock purchases in the course of potential investigations - especially those allowing sales, but freezing purchases."

At least one Republican wants to make an effort to investigate the trade freezes bipartisan. Sen. Ted Cruz (R-Texas) tweeted his support for Ocasio-Cortez's demand for an inquiry.

Fully agree. 👇 https://t.co/rW38zfLYGh
— Ted Cruz (@Ted Cruz)1611852477.0

But Ocasio-Cortez is adamantly opposed to working with Cruz, who she's repeatedly accused of "trying to get me killed" because of his objection to the congressional certification of the Electoral College vote on Jan. 6, which Democrats say incited the violence at the Capitol that day.

I am happy to work with Republicans on this issue where there’s common ground, but you almost had me murdered 3 wee… https://t.co/R0WLAMg723
— Alexandria Ocasio-Cortez (@Alexandria Ocasio-Cortez)1611855970.0

Another Republican senator, Tenessee's Marsha Blackburn, called on Robinhood to "free the traders."

Free the traders on @RobinhoodApp.
— Marsha Blackburn (@Marsha Blackburn)1611854441.0

"Once again Wall Street is crushing the little person on Main Street," Blackburn tweeted. "Wall Street bet on America's decline and got caught. Now, they want to stop hard working Americans from betting on America's rise."