GameStop's Reddit Users Lose, Regulators Meet
The Reddit-induced meteoric rise and fall of GameStop appears to have calmed after a wild two-week ride pitting small investors against Wall Street titans. The fallout may take longer to assess as Washington's lawmakers and regulators work to figure out just what happened when the retail investor army took on Wall Street and Robinhood, and where to go from here.
Here's the latest:
- Reddit’s "wallstreetbets" forum is littered with people confessing to painful losses from playing with GameStop's shares: “For me there's really no point in selling, it only makes the loss real,” wrote Unstoppable Drew, while aboland96 said, "I bought stock at 329 and while I only have two shares, I would kick myself if I took that big of a loss and sold and right after I do it shoots back up."
- GameStop volume has averaged about 54.5 million shares this week, down from a peak of about 197 million shares traded on Jan. 22. The price has dropped even more precipitously, caving almost 90% to close on Thursday at $53.50 from an intraday high of $483 on Jan. 28.
- Robinhood, the trading app most favored by retail investors, now faces more than 30 civil lawsuits filed across the country, according to various news outlets. Users became enraged when trading restrictions were imposed last week temporarily limiting purchases of certain securities. Robinhood did not immediately respond to a request for comment. The company said in a statement on its website in January that it did so to meet deposit requirements with its clearinghouse.
- Wall Street stood up for itself and hedge fund Melvin Capital, which was a main target of the wallstreetbets crowd, is still in business. It got an injection of $2.75 billion from two major investment managers, Citadel and Point72.
- Treasury Secretary Janet Yellen is hosting a meeting on Thursday with top regulators at the Securities Exchange Commission, Commodity Futures Trading Commission and Federal Reserve to discuss recent developments. “We really need to make sure our financial markets are functioning properly, efficiently and that investors are protected, and we’re going to discuss these recent events and whether these recent events warrant further action,” she said in an interview on Good Morning America. “We need to understand deeply what happened before we go to action but certainly, we’re looking carefully at these events.”
- The Federal Reserve is likely to deflect, saying that what happened is not a result of its loose monetary policy, but “we need to ensure it’s a fair market place because as you know financial markets are important for the economy,” Cleveland Fed President Loretta Mester said Thursday in an interview with CNBC. Federal Reserve Chairman Jerome Powell also sidestepped the question last week in his press conference after the Fed’s monetary policy meeting.