Unexpectedly, the losses incurred by most institutional investors on Wall Street due to cunning retail investors playing tug of war in GameStop (GME) shares have attracted the attention of the entire market including the United States (US) administration.
GME shares jumped to nearly 2000% in a month as retail investors' efforts on the Reddit site r / wallstreetbets were accompanied by the support of Tesla founder Elon Musk via Twitter tweet, "Gamestonk !!" making the jump impossible.
Following that, American financial services firm Robinhood decided to freeze any new purchases of GME shares including several other stocks such as AMC Entertainment, Nokia, Blackberry, Bed Bath & Beyond, American Airlines Group, Koss Corporation and several others.
It is believed that the restrictions were driven by a warning by the Securities and Exchange Commission (SEC) which is said to be monitoring market volatility. Robinhood said its users are no longer allowed to buy GameStop shares but can sell the shares at very low prices.
Still, Robinhood's actions were met with outrage among its consumers and retail investors. The average claims Robinhood is looking after the interests of investors of Wall Street institutions, such as Melvin Capital Management which is incurring huge losses due to the shortage of such shares for short-selling.
This issue is becoming more widespread and gaining the attention of legal supervisors and political groups.
U.S. Representative Alexandria Occasion-Cortez, D-N.Y., Via a tweet on Twitter described Robinhood's restrictions on trading activity as unacceptable and the tweet was backed by Musk in response: "Absolutely."
This is unacceptable.
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. https://t.co/4Qyrolgzyt
- Alexandria Ocasio-Cortez (@AOC) January 28, 2021
The eldest son of former US president Donald Trump Jr. at the same time calling this situation as proof that the system in the country is ‘broken’ for the sake of each other. Not to be outdone, Senator Sherrod Brown, D-Ohio insisted on conducting a trial on the current state of the stock market.
People on Wall Street only care about the rules when they're the ones getting hurt.
It's time for SEC and Congress to make the economy work for everyone.
As Incoming Chairman of the @SenateBanking Committee, I will be holding a hearing on the current state of the stock market. https://t.co/V9Hzp26jRT
- Sherrod Brown (@SenSherrodBrown) January 28, 2021
At the same time, a class action lawsuit has been filed by one of Robinhood users against the firm on charges of "Robinhood deliberately deleting GameStock to manipulate the market" and so far there has been no comment from them on the issue.
