A man passes in front of an AMC theater in the middle of the coronavirus disease pandemic (COVID-19) in the Manhattan district of New York City, New York, USA, on January 27, 2021.
Carlo Allegri | Reuters
Shares on Robinhood’s restricted trading list jumped during pre-market trading on Friday, after the online broker said Thursday evening it would resume limited trading on those names.
GameStop was up 96%, while Koss Corporation was up 93%. AMC Entertainment and Express increased 53% and 44%, respectively. Naked Brand Group gained 37%.
For some of the stocks, the rise in the market before Friday erased the heavy losses suffered during the previous session after Robinhood and other brokers announced restrictions on a handful of stocks, including, in some cases, not allowing customers to buy. new shares and sell only. GameStop, for example, fell 44% on Thursday.
Robinhood’s restricted list
In a statement on Thursday afternoon announcing that it would resume trading on the blacklisted shares, Robinhood said, “We will continue to monitor the situation and be able to make the necessary adjustments.” The start-up added that its previous decision to restrict trade – which angered many users – was necessary to meet the capital requirements required by the SEC for broker-dealers.
Interactive Brokers took similar steps to Robinhood, both of which also increased the margin requirements of certain securities. It is not uncommon to increase margin requirements, but the move to restrict trade was more extreme, which angered and confused some users.
The decision caused retail investors to turn en masse to some of the shortest names in the market, forcing hedge funds and those on the other side to rush to cover their losses. This, in turn, makes stock prices even higher. Investors turned to popular forums like Reddit’s WallStreetBets dashboard to discuss their business.
Short-term selling is a strategy in which investors borrow shares of a stock at a certain price, with the expectation that the market value will fall from that level when it is time to repay the shares lent.
This week saw two of the three busiest days dating back to at least 2007, as the trade frenzy continued, prompting several lawmakers to weigh in on whether regulators should act.
Retail investment has risen amid the pandemic, and on Friday Robinhood raised more than $ 1 billion and took advantage of lines of credit to make sure it had the capital needed to offer trading with volatile names.
“Through our lines of credit that we do all the time as part of normal day-to-day operations, we get more capital that we can deposit in clearing houses and this will allow us to invest ideally with fewer restrictions,” said Robinhood CEO Vlad Tenev told CNBC’s Andrew Ross Sorkin in an interview Thursday evening.
AMC is also reportedly looking to raise additional capital between jumps of more than 300% of its shares this year, according to Reuters sources. On Monday, AMC said it had raised $ 917 million in equity and new debt since Dec. 14.