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Robinhood, a free investment application, stopped retail investors from buying stocks in skyrocketing companies like GameStop, AMC entertainment, Nokia and more.

Robinhood users received a notification Thursday morning saying that GameStop and AMC stocks are no longer available for purchase and are “position-closing only.”

Photo of Robinhood notification

According to a statement made by Robinhood, they have begun limiting specific stocks to position-closing only, meaning that the shares of those stocks can no longer be purchased and are only available to be sold.

“In light of recent volatility, we are restricting transactions for certain securities to position closing only, including $AAL, $AMC, $BB, $BBBY, $CTRM, $EXPR, $GME, $KOSS, $NAKD, $NOK, $SNDL, $TR, and $TRVG. We also raised margin requirements for certain securities,” the statement said.

The share price of GameStop increased from $40 two weeks ago to $300 two days ago.

Stocks like GameStop were seen as “undervalued” by the Reddit page wallstreetbets and caused an increase in stock investors. The CEO of SpaceX, Elon Musk, tweeted in support of wallstreetbets.

Since then, many short term investors bought shares of the retail electronics company. 

Shortly after Robinhood‘s post about buying restrictions, GameStop was no longer available on the application.

Robinhood users who try to purchase shares of the GameStop stock are presented with a message saying, “This stock is not supported on Robinhood.”

According to Motherboard, 56% of Robinhood users own shares in GameStop and cannot do anything with them.

Many other stock trading platforms paused the mobility of the popular stocks.

GameStop responded to Robinhood hours later with a class-action lawsuit filed for restricting the trading of stocks. 

The lawsuit filed in the Southern District of New York accused Robinhood of: 

“purposefully, willfully, and knowingly removing the stock “GME” from its trading platform in the midst of an unprecedented stock rise, thereby deprived retail investors of the ability to invest in the open-market and manipulating the open-market.”

Robinhood released an email to its users shortly after they were faced with the lawsuit from GameStop. The email addresses the trading restrictions set early Thursday morning. 

“Starting tomorrow, we plan to allow limited buys of these securities. We’ll continue to monitor the situation and may make adjustments as needed,” the email said. “As a brokerage firm, we have many financial requirements, including SEC net capital obligations and clearinghouse deposits.” 

“These requirements exist to protect investors and the markets and we take our responsibilities to comply with them seriously, including through the measures we have taken today.”

Robinhood CEO, Vlad Tenev, spoke with CNBC on Thursday night to address the “misinformation” about why they decided to limit trades on the investment application.

“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.

Written ByLauren Akabori

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