A day after shares of U.S. retailer GameStop rose 135% -- a wild upswing spurred by an online army of investors on a mission to challenge the dominance of Wall Street -- Robinhood, the stock-trading app at the center of it all, clamped down. Almost immediately, GameStop's shares plunged, falling 75% in 90 minutes. The limits on trading by Robinhood and other online brokerages, put in place as fears of market instability grew more widespread, set off a furious outcry among small investors. They claimed that the very apps that had democratized trading -- Robinhood in particular -- were now doing the bidding of Wall Street. Small groups of investors protested outside the New York Stock Exchange and at the Menlo Park, California, headquarters of Robinhood, a company that popularized the notion of commission-free trading.
One of the more overused adages about business on the internet is that "if you aren't paying, you are the product." It's always been true, but it's become acute lately. Microsoft, Apple, and Amazon mostly sell you things like phones, computers, web-hosting services, and Instant Pots. On the other hand, Google, Facebook, and Visa largely sell you. You don't need to pay for a Visa card, but Visa sells its cardholders to companies all over the world.
The internet and stock market are aflame over Gamestop, the video game retailer whose stock is suddenly the darling of day traders who are putting the squeeze on Wall Street's big players. The stakes are enormous: The surge in trading drove Gamestop's value up by more than $10 billion on Wednesday alone. On Thursday, as several trading platforms placed restrictions on the stock, the shares slid 44%. Gamestop -- that feature of malls and shopping centers across the U.S. -- was worth about $2 billion in December. By Wednesday, it was worth $24 billion, roughly the same as meat giant Tyson and fuel refiner Valero Energy.
Shares in companies including videogame retailer GameStop soared again on Friday, as an army of small investors taking aim at Wall Street regained access to amateur share trading platform Robinhood. The app, weaponised by activist small investors to trap hedge funds in a "short squeeze" that has cost them $20bn on paper by some estimates, had suspended buying of stocks such as GameStop, cinema chain AMC and BlackBerry on Thursday. But it secured a $1bn (£730m) cash injection from its backers on Thursday evening, which the company said it required to allow its users to resume their buying spree, which began on the WallStreetBets forum of chat forum Reddit. The decision to permit what Robinhood said would be "limited buys" resulted in GameStop's shares climbing more than 67.6% on Friday, taking its notional value to more than $22bn, nearly 80 times what it was worth this time last year. The company's shares had whipsawed a day earlier, finishing the day 44% lower after Robinhood barred users from buying more stock, threatening the Reddit rebellion.
Key players in the GameStop saga faced questions Thursday from House lawmakers concerned that even as investing becomes more democratized the scales are still tilted in favor of the big Wall Street institutions. GameStop shares soared 1,600% in January before retreating sharply. Some of the toughest questions and harshest criticism was directed at Vlad Tenev, CEO of Robinhood, which operates an online trading platform that is popular with individual investors. Tenev defended Robinhood against allegations that trading restrictions it put in place at the height of the GameStop frenzy disadvantaged those smaller investors in favor of bigger institutional clients. She also asked Tenev about Robinhood's close relationship with Citadel Securities, which she maintains poses a conflict of interest.