Implicit in the forum's bargain, and its name, was that these trades were all high-risk, high-reward bets from traders doing it for the laughs. Reddit's chief executive Steve Huffman told the New York Times this week that wallstreetbets' users didn't need protection because they have generally known what they were getting into: "In my history of watching that community, most of them lose money. And that's a trade-off they do willingly for that sense of community and fun."
The stock price of video game retailer GameStop is soaring, and there's no good reason for it -- if you ask the professionals. But a group of traders that frequent Reddit's popular subreddit r/wallstreetbets has given these pros the finger, and they don't plan to quit anytime soon. Here's what's happening: GameStop hasn't been doing too great in recent years. Retail video stores are a dying business, and, typically, GameStop's quarterly earnings results are so bad that they almost always cause the stock to plummet. This also makes it a heavily shorted stock (shorting means borrowing a company's shares and selling them on the market with the hope you'll be able to re-buy them cheaper later), with hedge funds like Melvin Capital making massive bets that GameStop stock price will fall.
Massachusetts Secretary of the Commonwealth William Galvin is calling for the New York Stock Exchange to suspend trading in GameStop stock for a month after its stock recently surged following a major boost from an army of investors on Reddit. "I am closely monitoring the situation with GameStop stock, because I am concerned that Massachusetts investors will be seriously harmed," Galvin said in a statement on Wednesday. "I have called for the New York Stock Exchange to suspend trading in GameStop stock for 30 days, to allow for a cooling off period," he added. "I am hopeful that federal regulators will be looking into this as well." A spokesman for the U.S. Securities and Exchange Commission declined to comment.
Corporate benevolence has never looked so sweet. After first preventing its users from purchasing GameStop stock on Thursday, the free-trading app Robinhood reversed course. On Friday, in its ultimate wisdom and generosity, Robinhood decided to limit the number of GameStop stocks its users could purchase to one. So noted the company in a blog post, which was quick to emphasize that "these are aggregate limits for each security and not per-order limits, and include shares and options contracts that you already hold." Robinhood just announced it's limiting people to 1 stock on GME, AMC & other heavily shorted stocks.