GameStop and AMC Entertainment’s stock skyrocketed for the fourth consecutive day on Wednesday, forcing hedge funds to retreat from heavy losses and prompting calls for scrutiny from a social media-driven trading frenzy.
Short seller Citron, a target for some of the individual traders who helped generate huge gains for a series of niche Wall Street stocks last week, said in a video post that he had abandoned his gamble on the GameStop stock slump .
With commentators and lawyers calling for scrutiny of the measures, Nasdaq chief Adena Friedman said that exchanges and regulators need to pay attention to the potential for “pumping and dumping” schemes driven by social media conversations.
Some on Wall Street are wondering if months of general stellar gains have pushed stocks into bubble territory.
The Securities and Exchange Commission declined to comment.
Leading commentators have questioned the justification for moves in a series of highly praised stocks in the past few days, at a time when some on Wall Street are wondering whether months of stellar general gains have pushed stocks into bubble territory.
GameStop’s shares have risen nearly 700% in the past two weeks, taking the struggling video retailer’s market value from $ 1.24 billion to over $ 10 billion. The BlackBerry rose 185 percent and is on its way to its best month.
Together with AMC and Nokia Oyj, the two were again among the most traded in pre-market deals, with Reddit discussion topics again buzzing with stock talks.
“These are not normal times and although (Reddit) … something is fascinating to watch, I can’t help thinking that this is unlikely to end well for anyone,” said Deutsche Bank strategist Jim Reid.
The advent of easy-to-access applications like Robinhood, which allow ordinary Americans to trade in the stock market at almost no initial cost, sparked a boom in direct investment last year as trillions of dollars in official stimulus lifted the markets.
At GameStop, the retail army has launched itself against some of the institutional short sellers – a traditional area for hedge funds – who promote and bet on falls in companies they deem weak.
Overall, GameStop short sales fell $ 5 billion on a mark-to-market basis, net of financing in 2021, which included $ 876 million in losses on Tuesday, according to analyst S3 Partners .
Barron’s said on Tuesday that Massachusetts’ top securities regulator believes that GameStop’s stock trading suggests that there is something “systematically wrong” with the options traded around the shares.
Others say that negotiations at the end of the day depend on the investors who carry them out.
“The SEC has investigated Robinhood before, but when you have a structure that allows zero-cost trading platforms to operate – how do you stop this flow?” said Neil Campling, head of technology media and telecommunications research at Mirabaud Securities.
GameStop’s stock trading was halted due to volatility nine times on Monday and five times on Tuesday.