The stock market looked set to open lower on Friday morning, as stock futures markets were largely down. Just before 9 am EST, futures in the Dow Jones Industrial Average (DJINDICES: ^ DJI) fell about 150 points, or 0.5%. S&P 500 (SNPINDEX: ^ GSPC) futures fell 14 points, or 0.4%, while Nasdaq Compound (NASDAQINDEX: ^ IXIC) futures fell about 0.5%, or 60 points.
As we saw for much of the week, however, investors continued to see large movements in short shares. GameStop (NYSE: GME), AMC Entertainment Holdings (NYSE: AMC), and other stocks made big moves on Friday morning, jumping into pre-market negotiations to regain some of the ground lost on Thursday. Next, we’ll look at the latest moves and the tug of war between individual investors and Wall Street institutions behind them.
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Why GameStop is going up again
GameStop’s shares rose more than 80% in the premarket, around 9am EST. That was enough to make up for the entire 44% drop in shares on Thursday, and market participants pointed to the possible restoration of stock trading activity as a catalyst for the recovery.
On Thursday, many brokers, including the popular trading app Robinhood, chose to suspend customers’ ability to take on new positions on GameStop and other highly volatile stocks. This angered the broker’s clients and drew the ire of lawmakers in Washington, who expressed unusually bipartisan outrage over the suspensions. Congress now hopes to have broader hearings on the situation and online brokers.
In response, Robinhood raised $ 1 billion in capital and said that he will therefore be able to allow customers to start buying the shares again, at least on a limited basis. But Robinhood’s customers are not responsible for movements in the stock price so far, as Robinhood’s trading hours only start at 9am EST.
In fact, the shares had traded at $ 467 per share as soon as the pre-market session at 4 am EST started. It dropped rapidly to around $ 400, and the gains moderated further thereafter. However, when the opening bell rings and the mass of investors who do not have access to pre-market trading floods the ring, no one knows whether GameStop will rise, fall or stay where it is today. In turn, GameStop has not released a press release on its website to discuss what is happening, nor has any document with the Securities and Exchange Commission addressed the matter directly.
Will AMC sell on its high again?
Meanwhile, AMC Entertainment Holdings’ shares also rose, though not as sharply. The stock rose about 50% just before 9 am EST, which only recovered part of the 57% drop on Thursday. It had risen up to 70% at the beginning of the pre-market session.
One of the reasons why AMC’s recovery has been slower is that the cinema operator may well be looking to take advantage of the higher share price, raising even more capital. CNBC news suggested that AMC plans to sell even more shares, although it only raised more than $ 300 million from the sale of shares.
It is natural for companies like AMC and GameStop to sell shares if they think their value is attractive. In addition, the main financial institutions will be interested in seeing companies making more shares available for trading, as this helps to ease the tightening of sales and return trading to more normal conditions.
This may take a while
Many investors have seen small pressures before and rarely end well. However, they rarely receive as much attention as GameStop and AMC. Because of the huge controversy that the episode sparked, the unusual trading conditions for the two actions may continue for quite some time.