A man passes through an AMC theater in the midst of the coronavirus disease pandemic (COVID-19) in the Manhattan neighborhood of New York City, New York, USA, January 27, 2021.
Carlo Allegri | Reuters
Stocks on Robinhood’s shortlist jumped during pre-market trading on Friday, after the online brokerage said it would resume limited trading on heavily sold names.
GameStop rose 96%, while Koss advanced 93%. AMC Entertainment and Express increased by 53% and 44%, respectively. Group of naked brands gained 37%.
For some of the stocks, Friday’s pre-market peak erased heavy losses suffered during the previous session, after Robinhood and other retail brokers announced restrictions on a handful of stocks, including in some cases, not allowing customers to buy new shares and just sell. GameStop, for example, fell 44% on Thursday.
Robinhood’s shortlist
In a statement late on Thursday announcing that he would resume negotiations on blacklisted stocks, Robinhood said: “We will continue to monitor the situation and we can make adjustments as needed.” The start-up added that its previous decision to restrict trading – which angered many users – was necessary to meet the capital requirements required by the SEC for brokers.
Interactive Brokers has taken measures similar to those of Robinhood, with both also increasing the margin requirements for certain securities. It is not uncommon to increase margin requirements, but the move to restrict trading was more extreme, which angered and confused some users.
The decision came after retail investors flocked to some of the best-selling names in the market, forcing hedge funds and those on the other side to run to cover their losses. This, in turn, further increases stock prices. Investors turned to popular forums like Reddit’s WallStreetBets board to discuss their operations.
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.
Two of the three highest-volume days since at least 2007 have taken place this week as the frenzy of negotiations has advanced, prompting several lawmakers to consider whether regulators should take action.
Retail investments skyrocketed amid the pandemic, and on Friday, Robinhood raised more than $ 1 billion and used credit lines to ensure it had the capital it needed to offer businesses with volatile names.
“Using our lines of credit, which we do all the time as part of normal day-to-day operations, we obtain more capital that we can deposit in clearing houses and this will ideally allow us to invest more with less restrictions” The CEO of Robinhood , Vlad Tenev, told Andrew Ross Sorkin of CNBC on Thursday night.
AMC is also looking to raise additional capital amid more than 300% jumps in its shares this year, according to Reuters, citing sources. On Monday, AMC said that since December 14, it has raised $ 917 million in new equity and debt capital.