A sign hangs in front of an AMC theater on January 27, 2021 in Chicago, Illinois. AMC Entertainment’s shares more than quadrupled today, as investors continue their spree of buying heavily sold shares.
Scott Olson | Getty Images
In addition to GameStop, other popular short squeeze targets among Reddit operators were suffering major blows on Tuesday.
AMC Entertainment’s shares, which rose nearly 300% last week after strong selling pressure, fell 40% in morning trading. The iShares Silver Trust ETF, part of an attempt to compress the metal, fell 6%.
In other strongly shortened names that rose last week, BlackBerry fell 10%, Express fell 31%, Koss fell 41%, Naked Brand lost 27% and Nokia fell 5% right after the opening bell. Genius Brands fell 3%.
Short selling is a strategy in which investors borrow shares of a stock at a certain price in the expectation that the market value will fall below that level when it comes time to pay for the borrowed shares. It is a strategy often used by hedge funds.
In the midst of last week’s retail investment frenzy on heavily sold names, traders powered by Reddit have increased their shares in GameStop, AMC Entertainment, Koss and others, squeezing the hedge funds that sold the names. This week, those stocks are returning to Earth as Robinhood and other trading apps continue to limit the purchase of shares and option contracts and as tightening trade has weakened.
GameStop’s shares fell more than 50% on Tuesday.
Currently, Robinhood allows customers to purchase only 20 shares of GameStop and 350 shares of AMC Entertainment. Customers can purchase 700 shares of Blackberry and 1,000 shares of Koss. However, if Robinhood customers have more than the share limit, they will not be able to buy shares.
Robinhood and other brokers are required to comply with certain deposit requirements for clearing houses of commerce. Because of the high volume of trading, Robinhood said last week that he had to impose the restrictions because the deposit requirements set by his clearing house were much higher than expected.
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