The “Reddit rally” continued strongly on Wednesday, as officials began to question whether this was a populist market uprising or something more sinister.
Shares of GameStop and AMC Entertainment posted day gains of 134 and 301 percent, respectively, just the latest in what has been described on Reddit message boards as a “war” between novice investors against elites. of Wall Street who have short shares to profit from a potential share decreases.
“I want to help with this move and I’ll keep the line!” a user recently wrote about their investment in video game retailer GameStop.
But when asked about the dizzying heights reaching actions like GameStop, Nasdaq boss Adena Friedman raised the possibility of playing poorly.
Speaking to CNBC, Freidman said regulators must question whether the “social media activity” behind recent stock rises could be a form of market manipulation known as the pump and discharge scheme.
TD Ameritrade also noted issues announcing new restrictions on popular securities transactions such as GameStop and AMC. The retail broker said it added business limits “to mitigate risk for our company and customers.”
White House press secretary Jen Psaki also spoke, saying “Secretary Yellen and others are overseeing the situation,” while Federal Reserve Chairman Jerome Powell found himself dodging a question about GameStop during its press conference following the Federal Open Market Committee meeting.
GameStop shares have risen more than 700 percent in recent weeks, sending their market cap from about $ 1 billion to $ 24 billion on Wednesday.
The rally has been fueled by anonymous posters launching populist rage against the Wall Street machine, which has tried and failed to bet on GameStop and other actions.
Despite concerns, Wall Street professionals seem to believe they have simply been hit by the masses. This includes Andrew Left of Citron Research, the January 21 video that predicted that GameStop shares would fall to $ 20 per share only caused Reddit posters to double, leading to a zealous compression of shares.
“It’s not a download if there’s just a lot of people buying and buying,” Left told The Post on Wednesday. “They’re flash mobs that don’t respect the market and have made trading the lowest form of gambling.”
Esquerra, who reported threats against himself and his family to the FBI, said he abandoned his failed effort to shrink the stock market. Hedge fund Melvin Capital would also have closed its short position on GameStop after suffering a heavy loss.
Other hedges say they agree with Left. “More power for the WallStreetBets crowd,” sighed Thomas Thornton of Hedge Fund Telemetry. “They discovered how to play the system, how to beat the shorts and they won. Congratulations to them ”.
“It’s not fraud, it’s not market manipulation, it’s not illegal,” said Francis Curran, a lawyer in securities disputes at Kudman Trachten Aloe & Posner. “These are not boiler rooms that are cold. It’s a spontaneous revolution online and the other side of these operations seems very unhappy about it. “