Reddit investors shake up Wall Street

By CNN Business staff

Updated 10:21 PM ET, Thu January 28, 2021
30 Posts
Sort byDropdown arrow
7:37 p.m. ET, January 28, 2021

Robinhood CEO: 'We absolutely did not' restrict GameStop trading at the direction of a hedge fund

From CNN Business' Clare Duffy

Robinhood CEO Vlad Tenev speaks during a conference in 2018 in New York. 
Robinhood CEO Vlad Tenev speaks during a conference in 2018 in New York.  Alex Flynn/Bloomberg/Getty Images

Robinhood CEO Vlad Tenev explained what he called the platform's "very difficult decision" to restrict buying of GameStop (GME) and about a dozen other securities during a Thursday evening interview on CNBC.

He said the decision was made in response to requirements Robinhood must adhere to as a brokerage firm.

"We have lots of financial requirements, including SEC net capital requirements and clearinghouse deposits — that’s money that we have to deposit at various clearinghouses," Tenev said. He added that such requirements can fluctuate based on market volatility and can be "substantial in the current environment where there’s ... a lot of concentrated activity in these names that have been going viral on social media."

He added: "In order to protect the firm and protect our customers, we had to limit buying in these stocks."

Tenev also shot down speculation spread on social media Thursday that Robinhood restricted regular trading of the volatile stocks at the request of large Wall Street firms. One Robinhood user alleged in a class action lawsuit filed against the trading platform Thursday that the move was made "knowingly to manipulate the market for the benefit of people and financial institutions who were not Robinhood’s customers."

We absolutely did not do this at the direction of any market maker or hedge fund or anyone we route to or other market participants," Tenev said on CNBC.

The company plans to allow limited buying of the volatile stocks it restricted starting on Friday morning.

"Of course Robinhood stands for everyday investors," Tenev said. "It pains us to have had to impose these restrictions, and we’re going to do what we can to enable trading in these stocks."

5:31 p.m. ET, January 28, 2021

New York Attorney General reviewing Robinhood activity

From CNN Business' Clare Duffy

New York Attorney General Letitia James speaks at a news conference on September 20, 2020, in Rochester, New York.
New York Attorney General Letitia James speaks at a news conference on September 20, 2020, in Rochester, New York. Joshua Rashaad McFadden/Getty Images

New York Attorney General Letitia James is weighing in following Thursday's Robinhood chaos, and said she plans to look into the situation.

We are aware of concerns raised regarding activity on the Robinhood app, including trading related to the GameStop stock," James said in a statement Thursday evening. "We are reviewing this matter.”

Earlier Thursday, the app restricted trading of GameStop (GME) and several other volatile stocks, prompting fierce criticism. It plans to resume limited buys of such stocks on Friday.

5:15 p.m. ET, January 28, 2021

Robinhood, facing backlash, will allow limited buys on stocks it had restricted

From CNN Business' Allison Morrow

Trading app Robinhood said it will resume limited buys of volatile stocks that it had restricted earlier in the day.

Starting Friday "we plan to allow limited buys of these securities," the company said in a blog post Thursday. "We’ll continue to monitor the situation and may make adjustments as needed." 

Robinhood's decision to limit trades of GameStop (GME), AMC (AMC) and others that were bid up by a group of traders on Reddit sparked an immediate and intense backlash from retail investors. The WallStreetBets subreddit accused the app of market manipulation.

Within hours of the decision, one Robinhood user had filed a class-action lawsuit against the company, which has built its reputation on democratizing investing.

4:42 p.m. ET, January 28, 2021

Stocks finish sharply higher

From CNN Business' Anneken Tappe

US stocks ended sharply higher on Thursday. Economic reports in the morning underscored the need for more stimulus once again. Meanwhile earnings season keeps going. Apple (AAPL) was the worst performing Dow stock, closing down 3.5%, after reporting a blowout fourth quarter late Wednesday.

Elsewhere, some shine wore off for the Reddit favorites GameStop (GME) and AMC (AMC) after brokers and trading platforms restricted trading in those companies. GameStop closed down more than 44%, while AMC sold off more than 56%.

3:59 p.m. ET, January 28, 2021

Webull stops restricting trades on three volatile stocks

From CNN Business' Jazmin Goodwin

Webull is once again allowing users to buy stocks of GameStop, AMC and Koss.

Shortly before 11:30 am ET, Webull had announced it was restricting users from buying shares of those three companies because of "extreme volatility."

At 2:35 pm, though, the company reversed course:

Many traders have been swarming to Webull and other alternative brokerage apps after Robinhood restricted trading for GameStop and others on Thursday.

3:19 p.m. ET, January 28, 2021

Here come the Congressional hearings...

From CNN Business' Matt Egan

Stefani Reynolds/Bloomberg/Getty Images
Stefani Reynolds/Bloomberg/Getty Images

Democratic Senator Sherrod Brown, the incoming chairman of the Senate Banking Committee, announced plans Thursday to hold a hearing on the turbulent state of the stock market.

“People on Wall Street only care about the rules when they’re the ones getting hurt," the Ohio Democrat said in a statement.

The decision to hold a hearing comes after days of wild swings in shares of GameStop (GME), AMC (AMC) and other stocks bid up by a group of traders on Reddit. The enormous rallies have caused heavy losses for some hedge funds that bet against the stocks.

"American workers have known for years the Wall Street system is broken – they’ve been paying the price," Brown said. "It's time for the SEC and Congress to make the economy work for everyone not just Wall Street."

Brown did not set a date or the parameters for a hearing.

2:55 p.m. ET, January 28, 2021

Robinhood customer files class action suit over GameStop trading restrictions

From CNN Business' Clare Duffy

A Robinhood user filed a class action lawsuit against the platform on Thursday after it restricted trading of GameStop (GME) stock — which has soared in recent weeks thanks to the support of Reddit traders — causing it to lose much of its value today. 

The complaint alleges that Robinhood’s action deprived users of taking advantage of potential gains as GameStop’s stock rose later in the day, as well as making it impossible for them to “short” the stock in case it drops. It also alleges that Robinhood customers have endured “substantial losses” because of the move, and claims the trading platform violated Financial Industry Regulatory Authority rules by denying users the opportunity to trade the stock. 

“Upon information and belief, Robinhood’s actions were done purposefully and knowingly to manipulate the market for the benefit of people and financial institutions who were not Robinhood’s customers,” the complaint, filed by Brendon Nelson, alleges. 

Robinhood said in a statement Thursday that, “in light of recent volatility, we are restricting transactions for certain securities to position closing only.” 

The company took similar actions for other stocks, including AMC (AMC), BlackBerry (BB), Nokia (NOK) and others, something the suit also takes issue with.

“Robinhood continues to randomly pull other securities from its app for no legitimate reason,” the complaint states. 

3:03 p.m. ET, January 28, 2021

#StopTheSteal, once devoted to election fraud, is now filled with angry traders

From CNN Business' Brian Fung

A hashtag once devoted to spreading baseless conspiracy theories about the 2020 election has now been taken over by investors fuming over the decision by online brokerages to restrict trading of shares of GameStop and other volatile stocks. 

On Twitter, #StopTheSteal had been a major source of election misinformation, having been inspired by a now-banned Facebook group of the same name. 

But on Thursday, as Robinhood moved to limit purchases of GameStop, irate Twitter users called for the stock trading app to “stop the steal” that is allegedly underway on behalf of hedge funds and at the expense of the retail investors (and Reddit users) who had driven up GameStop’s share price. 

The hashtag is now filled with angry traders.

“When working class people lose money in the market it’s CAPITALISM,” wrote one user. “When a hedge fund loses billions because the working class played the game better then it’s STOP THE TRADING.”


The evolution of the hashtag from a hub of misinformation into a hotbed of populist economic fervor may only be temporary. But it underscores just how quickly conditions can change on social media.

2:14 p.m. ET, January 28, 2021

GameStopped American Airlines shares can't maintain their altitude

From CNN Business' Chris Isidore

Well that didn't last long.

Even after it reported a record loss and warned of a larger loss in the first quarter than in the most recent three months, American Airlines shares took off like a rocket early Thursday. Shares were up as much as 87% at one point in premarket trading, with the help of investors posting on Reddit 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."

According to S3 Partners, about 19% of American shares are controlled by short-sellers. No other US airline has as much as 5% of its shares held by shorts.

But soon after the market opened, American shares reached their high of the day, rising 31.4%. And then they started a steady decline throughout much of the rest of the day. By mid-afternoon they were up less than 10%.