Reddit investors shake up Wall Street

By CNN Business staff

Updated 10:21 PM ET, Thu January 28, 2021
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11:38 a.m. ET, January 28, 2021

Robinhood is getting trashed on Google Play

From CNN Business' Jordan Valinsky

Some users aren't thrilled that Robinhood has restricted trading of several hot stocks, including GameStop (GME), BlackBerry (BB), Bed Bath & Beyond (BBBY) and Nokia (NOK).

The app's ratings has fallen to a 1 star on Google Play. Reviewers are criticizing Robinhood for the move and calling it "market manipulation." Another person wrote "Horrible app, no notion of a free market."

Robinhood is still maintaining its 4.8 out of 5 rating on Apple's App Store.

11:38 a.m. ET, January 28, 2021

This headphone maker's stock is even hotter than GameStop 

From CNN Business' Paul R. La Monica

Sure, GameStop's (GME) stock has surged this year. But investors in headphone maker Koss have a message for millennial GameStop traders — hold my coconut pineapple hard seltzer.

Koss (KOSS), a small Milwaukee-based firm, has soared 800% in 2021 — from just under $3.50 a share to about $47. Most of the stock's gains have taken place in the past week. GameStop, if you're keeping score, is up "just" a little more than 600% year-to-date.

Why is Koss doing so well? After all, the company reported a nearly 4% drop in sales in its most recent quarter due to weaker demand at big retailers,

It appears that Koss has also received positive mentions from Reddit's WallStreetBets members. The company, like GameStop, is a target of short-sellers — as hedge fund manager Will Meade pointed out on Twitter. Koss gets a fair amount of love from the headphones subreddit as well.

Koss was not immediately available for comment about the stock's surge. But CEO Michael Koss said in the company's October earnings report that things are going better for the company than the headline numbers would suggest.

"We experienced an increase in online direct-to-consumer sales driven by the continuation of people studying and working from home. Additionally, we saw a rebound in our export markets, especially in Europe, and in many of our US-based distributors," Koss said.

Still, the stock's huge move has some consequences. Koss was one of eight stocks — along with GameStop, AMC (AMC) and BlackBerry (BB) — that is now restricted by Robinhood. Koss shares were extremely volatile Thursday, swinging from big gains to a nearly 50% loss by midday.

11:10 a.m. ET, January 28, 2021

Mark Cuban on Reddit traders: It’s truly business as usual

From CNN's Alison Kosik

Billionaire Dallas Mavericks owner Mark Cuban told CNN that the frenzy happening around stocks like GameStop is “truly business as usual with the only change being small stock traders giving the business to the big short sellers.”

Cuban tweeted support for the Reddit group sending GameStop sky-high.

He also sent a warning to naysayers:

11:01 a.m. ET, January 28, 2021

Dow rallies 500 points

From CNN Business' Anneken Tappe

GameStop might be tumbling but the major stock indexes are soaring today.

The Dow is up some 500 points, or 1.6%, after just an hour and a half of trading.

The S&P 500, the broadest measure of the US stock market, is up 1.5%, and the Nasdaq Composite is up 1%.

Even the small-cap Russell 2000 index, which GameStop (GME) is a constituent of, is up 0.6% despite the fateful gaming retailer's shares dropping 24%.

10:45 a.m. ET, January 28, 2021

WallStreetBets founder on GameStop: There is no precedent for this

The man who founded WallStreetBets on Reddit says he could never have predicted the frenzy around stocks like GameStop. 

Speaking to Julia Chatterley on First Move, Jaime Rogozinski said:

This happened so quick, so fast. The turning point was when I saw yesterday that the White House was commenting on this story. I can’t imagine that I ever envisioned this happening."

Watch the full interview below.

10:22 a.m. ET, January 28, 2021

The latest GameStopped company: American Airlines

From CNN Business' Chris Isidore

The latest GameStopped company is American Airlines, the world's largest airline.

Thursday American was one of three US airlines - along with Southwest and JetBlue - report a record loss for 2020. American warned that its first-quarter loss will likely be worse than its fourth-quarter loss.

But shares soared pre-market following the report, at one point rising 87% before settling back down. Shares of American were up about 15% in early trading. Once again the rise appeared to be driven by posts on Reddit by some who hoped to drive up the price and put a squeeze on investors who bet against it by shorting it.

"AAL flying to moon?" wrote one investor. "Let's see if we are going to get some tasty juice out of a squeeze."

Those investors have recently driven up the price of shares of GameStop (GME), another troubled money losing company. According to S3 Partners, about 19% of American shares are controlled by shorts. No other US airline has as much as 5% of its shares held by shorts.

American CEO Doug Parker declined to comment on the stock move in his call with analysts and media Thursday: "As a rule, we don't speculate on the day-to-day movements of our share price. We'll stick to that rule today."

10:06 a.m. ET, January 28, 2021

What's a short seller and a short squeeze?

From CNN Business' Allison Morrow

Short sellers are investors who bet that a stock is going to fall. They borrow shares to sell on the market with the promise to buy back those shares at a later date. If they win the bet, they sold high and bought low, and they walk away with money in the bank.

If they lose the bet and the stock goes higher, they have to buy back the stock at more than the price they originally sold it for -- and when a bunch of people are scrambling to cover their losses and get out, it can shoot the price even higher, called a short squeeze.

Short interest in GameStop surged toward the end of the year, as investors bet against the company's earnings potential. With a mega short squeeze taking place, short sellers began to hedge their bets, buying more stock to make up for their mounting losses.

10:00 a.m. ET, January 28, 2021

Robinhood bans buying GameStop, AMC and other Reddit darlings

From CNN Business' Matt Egan

Robinhood imposed restrictions Thursday that prevent users of the free-trading app from buying shares of GameStop, AMC and other stocks targeted by Reddit traders.

Citing “recent volatility,” Robinhood said it will only allow users to close out their positions in those stocks, which include Best Buy, Bed Bath & Beyond, Express and Nokia.

Following the move by Robinhood, shares of GameStop (GME) lost all of their premarket gains and turned sharply negative.

Robinhood said that it also raised margin requirements for certain securities, a move that can protect the startup from losing money should some of these stocks plunge.

“We’re committed to helping our customers navigate this uncertainty,” the company said in a statement. “We fundamentally believe that everyone should have access to financial markets.”

10:02 a.m. ET, January 28, 2021

Stocks open higher but GameStop tumbles

From CNN Business' Anneken Tappe

US stocks opened in the green Thursday amid various economic reports: The US economy contracted by 3.5% last year, making it the nation’s worst year since 1946 and the first decline since the financial crisis.

Meanwhile, a lower-than-expected number of Americans filed claims for unemployment benefits last week.

While investors are digesting economic reports and earnings season roars on, GameStop (GME) continues to be in focus after various brokers have restricted trading in the company. GameStop plunged more than 20% at the opening bell.