The “Reddit rally” continued in full swing on Wednesday, when officials began to question whether they are dealing with a populist market uprising or something more sinister.
GameStop and AMC Entertainment shares recorded one-day gains of 134 percent and 301 percent, respectively – just the latest in what was described on Reddit’s message boards as a “war” between novice investors against Wall Street elites who sell shares to profit from potential participation declines.
“I want to help with this movement and I will keep the line!” a user recently wrote about his investment in the video retailer GameStop.
But when asked about the dizzying heights of actions like GameStop, Nasdaq chief Adena Friedman raised the possibility of foul play.
Speaking at CNBC, Freidman said regulators need to question whether the “social media activity” behind the recent spikes in stocks could be a form of market manipulation known as the pump-and-dump scheme.
TD Ameritrade also signaled problems ahead by announcing new restrictions on popular stock transactions like GameStop and AMC. The retail brokerage said it added trading limits “in the interest of mitigating risk for our company and customers.”
White House press secretary Jen Psaki also interjected, saying “Secretary Yellen and others are monitoring the situation”, while Federal Reserve President Jerome Powell found himself avoiding a GameStop question during his interview. after the meeting of the Federal Open Market Committee.
GameStop’s shares have risen more than 700 percent in the past few weeks, raising its market capitalization from around $ 1 billion to $ 24 billion on Wednesday.
The rise was fueled by anonymous posters spreading populist fury against the Wall Street machine, which tried and failed to bet against GameStop and other stocks.
Despite the concerns, Wall Street professionals seem to believe that they have simply been defeated by the masses. That includes Andrew Left of Citron Research, whose January 21 video predicting GameStop’s stock would drop to $ 20 a share only caused Reddit’s posters to double, resulting in a zealous reduction in shares.
“It’s not a bomb and a dump if it’s just a lot of people buying and buying,” Left told The Post on Wednesday. “These are flash mobs that don’t respect the market and have turned commerce into the lowest form of gaming.”
Left, who reported threats against himself and his family to the FBI, said he had abandoned his failed effort to sell shares. The hedge fund Melvin Capital also closed its short position on GameStop after suffering a huge loss.
Other hedgies say they agree with the left. “More power for the WallStreetBets crowd,” sighed Thomas Thornton of Hedge Fund Telemetry. “They figured out how to manipulate the system, how to beat shorts and won. Congratulations to them. “
“It is not fraud, it is not market manipulation, it is not illegal,” said Francis Curran, securities litigation lawyer at Kudman Trachten Aloe & Posner. “This is not a boiler calling people. It is a spontaneous online revolution, and the other side of these negotiations seems very unhappy about it. “