Shares of GameStop and other stocks rose after Robinhood removed trading restrictions on Friday (Feb. 5), Reuters reported. GameStop escalated 8.4 percent in U.S. pre-market trading.
The commission-free investing startup said on Thursday (Feb. 4) that it had removed all buying restrictions following a surge in clearinghouse deposit requirements. A rush of investors, many springing from the Reddit board WallStreetBets, caused losses for some hedge funds. Some funds, however, came out ahead, with $3.6 billion in profits compared to losses of $12.5 billion in January, financial analytics firm Ortex said on Friday, per Reuters.
“The speculation is now fading, but that doesn’t mean it can’t come back a month or two months from now,” noted Peter Cardillo, chief market economist at Spartan Capital Securities in New York. “A lot of the small investors may have gotten burnt, so it’s going to take time to heal that wound. It may not pop up in those stocks that were already attacked, but it could happen in other companies, and maybe on a broader scale.”
Newly appointed Treasury Secretary Janet Yellen is investigating the rally and is planning discussions with other top officials.
GameStop’s stock was up to $483 last week, but later crashed to roughly $53. It is still up about 177 percent from the prices before the trading frenzy. AMC shares, also part of the trading frenzy, were up 5.2 percent.
On Sunday (Jan. 31), Vlad Tenev, co-founder and co-CEO of Robinhood, took to the invitation-only audio social media Clubhouse to discuss the decision to restrict trading, saying it was aimed at protecting the firm and its customers, CNBC reported on Friday (Feb. 5).
Robinhood answered questions last week on its blog regarding the trading restrictions. The investing startup has faced backlash, with over 30 civil lawsuits filed against it just days after it limited stock buys for GameStop on its app.
NEW PYMNTS DATA: BUY NOW, PAY LATER CONSUMER STUDY
About: Buy Now, Pay Later: Millennials And The Shifting Dynamics Of Online Credit, a PYMNTS and PayPal collaboration, examines the demand for new flexible credit options as well as how consumers, especially those in the millennial demographic, are paying online. The study is based on two surveys, totaling nearly 15,000 U.S. consumers.