Stock trading platform Robinhood has decided to prevent investors using their app from acquiring stocks of several companies on Thursday, including GameStop and AMC. This comes after sudden, massive increases in stock value took place.
According to Robinhood, it decided to block users from buying shares. It currently only gives them permission to share. Additionally, it remained unclear with regards to how long these restrictions would remain in place.
As of Thursday, GameStop stocks plummeted down by almost 24%. At midday, it’s stock value was at $265. On the other hand, the value of AMC shares saw a sharp decline and went down by 50%.
Apart from the two companies, the stock trading platform also decided to apply trading restrictions to a few other companies. These include Express, Bed Bath & Beyond, Koss, and Blackberry.
In a blog post, Robinhood explained their stance on the situation. The company said that, in the mids of market volatility, they find it important to help their users be informed. They also added that they “fundamentally believe” that everyone has the right to access financial markets.
The company’s decision was criticized by those who previously advocated the use of the trading platform. Some of these critics include those who plan on capitalizing on the sudden rise of interest in companies that are struggling.
The criticisms on Robinhood have come to a point where one investor, Brendon Nelson, filed a lawsuit against the company. Nelson claims that the company is depriving users of the opportunity to gain what they earned from the stocks invested on GameStop.
GameStop, Other Struggling Companies See Surge in Stock Value
Both struggling companies, GameStop and AMC saw their shares significantly move up in the past few days. This comes as investors banned together on Reddit to try and increase stock prices to sabotage investors from Wall Street that decided to bet against the said companies’ shares.
During this entire fiasco, Robinhood remained at the center of attention. This comes as the company saw an increase in popularity since it is easily useable by casual and new investors.
However, due to their decision, the trading platform has been criticized by many different kinds of people. This even includes Dave Portnoy, the founder of Barstool Sports, who expressed his dismay on Twitter.
You are scam artists. You are crooks. You deserve to be behind bars and you know it https://t.co/NlelsKhTnY
— Dave Portnoy (@stoolpresidente) January 28, 2021
On Thursday morning, before it plummeted to $265, GameStop shares were trading higher than $450. This is more than double its closing value on Tuesday, which was $147. This is also significantly higher than the value GameStop had in the first week of the month, which closed at only $17.25 on Jan. 4. Since the beginning of the year, it’s value has surged up by more than 1000%.
Small investors grouping up on message boards like Reddit has caused this surge in value.
Apart from GameStop, small investors also noticed AMC Entertainment as the hashtag “#SaveAMC” trended on Wednesday due to concerns that the company would file for bankruptcy as a result of the COVID-19 Pandemic. This caused the stock value of the movie theater chain company to go up by 230% on Wednesday.