Closed Markets latest: GameStop closes up 68% – as it happened

WallStreetBets Forum as Hedge Funds Lose Billions to Reddit Traders Running Amok

All the latest as a wild week on Wall Street, which pitted Redditors against hedge funds, comes to a close.

Wild week on Wall Street

Oliver Ralph

It has been a wild week on Wall Street. GameStop has made the headlines, but others such as AMC, Express and American Airlines have also been volatile.

The heavy trading has spread to commodities such as silver and even a Malaysian maker of rubber gloves, while politicians, regulators, lawyers and celebrities have all weighed in with their views.

We’ll bring you the details of what you need to know on all the biggest markets stories on this live coverage page.

GameStop shares surge 70% in early trade

Mamta Badkar in New York

Shares in video game retailer GameStop are up nearly 70 per cent in pre-market trade on Friday after online brokerage Robinhood eased trading restrictions.

The shares ended 44 per cent lower on Thursday during a volatile session in which brokers temporarily restricted buying on certain so-called meme stocks that have been targeted by traders on Reddit message boards in hopes of inflicting losses on hedge funds that have placed large bets against the same shares.

Robinhood, which faced political backlash after it moved to restrict trading on certain securities yesterday, has raised more than $1bn from its existing investors and tapped credit lines from banks to shore up its financial position. Late on Thursday the company said it would “open up trading for some of these securities in a responsible manner” and the announcement sent GameStop shares more than 60 per cent higher in overnight trade.

GameStop, BlackBerry and AMC have been among the companies that day traders have pushed up because they are the subject of large short bets by hedge funds. The video game retailer also had a small number of free floating shares, which makes it hard for investors looking to cover their shorts.

Rubber glove giant’s stock soars as Reddit users urge traders to buy

Stefania Palma in Singapore

Shares in the world’s biggest rubber glove maker jumped as users of a Reddit forum rallied behind the under-pressure group, as the surge in online retail investor activism in the US spread abroad.

Malaysia-based Top Glove’s stock jumped as much as 14 per cent on Friday after Reddit users called on retail investors to buy the shares.

The emergence of online investor activism in the south-east Asian country echoed that in the US. Users of r/WallStreetBets, a Reddit forum of more than 5m, have co-ordinated this week to propel into the stratosphere shares in games retailer GameStop and other companies that were the target of hedge funds’ bearish wagers.

“Our glove companies, with whatever imperfections they have, are our national treasure . . . they are our pride,” wrote Revenant, a moderator of the r/BursaBets subreddit, which has signed up almost 7,000 members since it was set up on Thursday.

Shares in Top Glove and other Malaysian glove makers soared throughout much of 2020 as the coronavirus pandemic boosted demand for personal protective equipment. But their stock prices have fallen following the successful development of Covid-19 vaccines.

Read more here.

Silver price jumps on Reddit post

Henry Sanderson

The price of silver rose by 4 per cent on Friday, a day after a user on Reddit’s WallStreetBets forum urged people to buy shares in a leading silver exchange-traded fund to create a “short squeeze” in the market.

The price of silver rose to $27.4 an ounce in morning trading, following a 6 per cent rise in the shares of the iShares Silver Trust on Thursday.

On Thursday user u/TheHappyHawaiian said buying shares in the ETF would “force physical delivery of silver” into its vaults, thereby causing a “short squeeze” on the market, pushing up the silver price. That would present problems for traders who were short silver on the futures markets, they said.

“The people naked shorting silver via the futures markets are a couple of large banks and making them pay dearly for their over leveraged naked shorts would be incredible,” the user said.

Silver surged by as much as 7 per cent on Thursday while the price of the iShares Silver Trust ended the day $1 above its net asset value due to the influx of buying.

Analysts at Commerzbank, however, said that the impact on silver was likely to be muted, given the large size of the silver futures markets.

“We are confident that the influence of retail investors on silver will not last all that long, and that ultimately industrial and institutional demand will be the key factor in the longer term,” they said. “That said, the latest price surges are likely to see financial market participants focus more on precious metals again.”

Shares in silver miners also rallied on the news on Thursday with New York-listed First Majestic Silver up by 22 per cent. The miner was targeted by a series of Reddit users on Thursday calling for a “short squeeze” against those betting on a decline in the stock.

GameStop: how a video game chain was dragged into the war on Wall St

Mamta Badkar in New York

Erik Riggiola, a customer at GameStop’s Union Square store in Manhattan, has little sympathy for the big investors who have been burnt by betting against the video game retailer.

The 49-year-old, who lost his job as an operations manager at a delivery company during the financial crisis, said Wall Street was getting a “taste of its own medicine”. But even Mr Riggiola had to admit that although GameStop was “not at the point of extinction”, it did look like a business that needed to adapt to keep up with the times.

Yet, in the past month, the struggling 37-year-old chain has gone from a share price that averaged around the $18 mark before the trading frenzy began, to a record intraday high of $483 on Thursday and a $28bn or so market capitalisation that exceeded Halliburton, Kellogg and about half the companies on the S&P 500. Though the stock later retreated sharply amid volatile trading.

The reason for the exuberance is, in part, the hope for a potential turnround led by new board member Ryan Cohen, co-founder of online petcare business Chewy. But a much larger factor has been a co-ordinated effort among amateur traders to bet against the short sellers who make money by buying shares that they think will fall.

Read more on the company at the heart of the price action here.

Citron to discontinue short-selling research

Mamta Badkar in New York

Citron Research will stop two decades of short selling analysis after getting caught up in this week’s frenzied trading that was aimed at squeezing investors out of their short positions.

Andrew Left, founder of Citron, has been one of the most outspoken short-sellers of video game retailer GameStop, whose share price surged in volatile trading this week.

“Twenty years ago I started Citron with the intention of protecting the individual against Wall Street, against the fraudulent stock promotions that were all over,” Andrew Left, founder of Citron, said on Friday.

“Now after 20 years we noticed something. When we started Citron was to be against the establishment, we’ve actually become the establishment… but it’s completely, now lost its focus. As of today Citron Research will no longer be publishing what can be considered short research reports,” he added.

Earlier this week Mr Left said the majority of Citron’s short position was covered when GameStop traded “in the $90s at a loss of 100%.”

Tech investor advises growth companies to avoid the stock market

Madison Darbyshire

High growth companies should avoid public markets and instead seek private capital as stock markets and volatile sentiment make IPOs too risky, according to one of Europe’s biggest tech investors.

“In the past few months we’ve been trying to persuade companies not to go public or do [special purpose acquisition vehicles] because they may get completely the wrong kind of shareholders and build capital in the wrong way,” said James Anderson, who helps run the £17.5bn Scottish Mortgage Investment Trust.

Scottish Mortgage, run by asset manager Baillie Gifford, has over the past decade has become an unlikely star in the world of tech investing. Mr Anderson made his name betting big and betting early on high growth tech companies in Silicon Valley, such as Tesla, Facebook, Twitter and Netflix.

Mr Anderson said that his fund has taken long-term positions in high growth companies for decades. But he added that in the past two years, the money pouring in to growth tech has come from investors not looking to hold companies for the long term, but “because they think it’s going up in the short run.”

GameStop surges 72% as brokerages open up trading

Matthew Rocco

GameStop rallied 72 per cent on Friday morning, rebounding from its first fall in six days after brokerages loosened trading restrictions.

The stock, which has become a favourite of Reddit users and other retail investors, jumped to $332.96 and wiped away its losses from Thursday, when it fell 44 per cent. GameStop roughly doubled in value at the start of the Friday session before trading was halted due to volatility.

Robinhood, the popular stock trading app, announced on Thursday that it would allow some purchases of GameStop and other stocks after previously limiting users’ ability to buy the shares.

Shares in AMC Entertainment and Express, two other stocks swept up in the Reddit-fuelled buying frenzy, also swung sharply higher on Friday.

Cinema chain AMC rose 45 per cent to $12.67. Express, the clothing retailer, was up 39 per cent at $6.51.

US regulators investigating trading curbs

Kiran Stacey

US regulators are investigating trading curbs put in place by brokers this week to limit the extreme volatility in certain companies’ share prices.

The US Securities and Exchange Commission said on Friday it was reviewing restrictions put in place by brokers to limit trading in certain stocks such as GameStop, which has been targeted by users of Reddit message boards in the hope of inflicting losses on hedge funds which have taken out bets against the company. GameStop’s shares rallied 66 per cent on Friday after the online brokerage Robinhood eased its curbs, leaving the company’s shares 118 per cent higher than where they started the week.

Herren Lee, the acting commissioner of the SEC, said in a joint statement with three other commissioners: “The Commission will work to protect investors, to maintain fair, orderly, and efficient markets, and to facilitate capital formation.

“The Commission is working closely with our regulatory partners, both across the government and at Finra and other self-regulatory organisations, including the stock exchanges, to ensure that regulated entities uphold their obligations to protect investors and to identify and pursue potential wrongdoing. The Commission will closely review actions taken by regulated entities that may disadvantage investors or otherwise unduly inhibit their ability to trade certain securities.”

American Airlines to raise over $1bn after shares jump

Claire Bushey

American Airlines is to sell $1.1bn of shares, capitalising on the market turmoil caused by the struggle between Wall Street and retail investors.

The Fort Worth airline said that it would sell the stock into the market over time. Goldman Sachs, Citigroup, Barclays and BNP Paribas are involved in the deal.

The airline’s stock was down 1.7 per cent in morning trading to $17.80.

American’s share price has surged in the past two days as small investors, many of whom trade stock tips and strategies on the Reddit forum r/WallStreetBets, have scooped up stock. American, a target of short sellers, is one of a number of companies the retail investors have seized upon after they routed hedge funds by fueling a run up in the share price of video game retailer GameStop.

The pandemic has battered airlines around the globe as travel restrictions have forced would-be customers to stay home. American reported an $8.9bn net loss for 2020.

American began selling equity into the market in October at an average price of $12.87 a share. The deal raised $882m. The airlines said yesterday in a filing that it planned to raise more money.

JPMorgan tells staff to stick to long-term investing

Stephen Morris in London

As chaotic US stock trading resumed on Friday, JPMorgan sent an email to its investment banking staff about its personal account dealing (PAD) policy, reminding them that they are “obligated to adhere to its requirements and restrictions, even during the recent market volatility”.

The memo says that PAD is “geared towards long-term, non-speculative investing and the expectation is that you bear this in mind when engaging in personal investing activities”.

Staff should also “refrain from actual or perceived conflicts of interest that could arise due to their investment choices” and be aware they are subject to minimum holding periods, so may not be able to “immediately sell or buy” during big stock swings.

Furthermore, employees must “hold themselves to the highest standards of ethical conduct” and exercise “good judgement in the absence of a specific policy or procedure”.

One recipient summed it up more succinctly: “NO GAMESTONK”.

Another reason JPMorgan may be urging its staff to show restraint? They received their bonuses this week.

GameStop ‘not the focus’ of Biden meeting with economic team

Lauren Fedor

White House press secretary Jen Psaki refused to be drawn into commenting on GameStop on Friday and told reporters that Joe Biden’s meeting with his economic team today would not be focused on the trading controversy.

“The focus of the meeting about the recovery plan, about the status of the economic recovery, about obviously the data that we saw yesterday. I am sure they will cover a range of topics during that meeting, but that is not the focus.”

She added: “I know it’s a big story but…our focus and our big story is getting the American people back to work.”

When pressed again, Ms Psaki referred to the SEC statement from earlier today, saying: “The US government is starting to work how it should. The SEC is a regulatory agency that oversees and monitors developments along these lines.”

Robinhood raises $1bn in convertible debt

Miles Kruppa

The more than $1bn investment announced by Robinhood is in the form of convertible debt, according to people briefed on the discussions.

The debt would convert at the lower of an implied valuation of about $30bn or a 30 per cent discount to the company’s upcoming initial public offering price, the people said. Ribbit Capital is leading the investment with Iconiq Capital. The two firms injected more than $500m in the company, some of the people said.

Other existing Robinhood investors are expected to put in the remaining capital by the end of today, the people added.

Robinhood referred the Financial Times to an earlier statement, which said: “This is a strong sign of confidence from investors that will help us continue to further serve our customers”.

GameStop’s wild ride: how Reddit traders sparked a ‘short squeeze’

Ian Smith and Robin Wigglesworth

This week, the global stock market went down the Reddit hole. 

A growing army of day traders has been a feature of the recovery in stocks since the sell-off last March, as a mixture of lockdowns, low interest rates and cancelled sporting competitions encouraged more and more everyday investors to try their hand at the equity market. This has accelerated since the start of 2021, as the Reddit message board, and its fast-expanding r/WallStreetBets community, have managed to channel the energy to a handful of previously unloved stocks.

The result has been a turbulent week for those shares at the centre of the action, which has spread to individual stocks around the world. Wild bouts of trading have triggered stock-exchange trading curbs and restrictions from brokers on what customers are allowed to buy.

Overall volatility in the stock market has increased, and people far beyond the finance industry have been transfixed by the battle between Wall Street and the have-a-go individual investor. 

How did we get here? Read more here.

US-listed European share volumes hit record

Laurence Fletcher

The value of European companies’ shares traded on US exchanges hit a record high on Wednesday during a frenzied week of trading, driven partly by in-demand stock Nokia.

According to a Morgan Stanley client note, volumes of American Depository Receipts of European companies hit $13bn on Wednesday. For the week turnover was $32bn, close to double the average since 2015.

Nokia, whose ADRs traded $13bn this week, has been one of the favoured stocks for retail investors to bet on in recent days. The ADRs, which were trading at $4.2 at the end of last week, soared as high as $7.35 on Wednesday, fuelled by interest on Reddit.

Bill Gross likens GameStop frenzy to ‘populist political uprising’

Colby Smith

The recent GameStop trading frenzy is “indicative of prior mania tops as far back as the South Sea Bubble of 1720″ and should be investigated by regulators, according to famed fixed income manager Bill Gross.

The Pimco founder likened the short-squeeze to a “populist political uprising” and expressed concerns about the magnitudes of the moves and the pain expected to come when the market turns.

“While the Capitol of Capital has not exactly been stormed as in recent weeks, the will of the ‘common’ investor has imposed significant hurt on short selling, ‘unpatriotic’ hedge funds that have long profited at retail’s expense,” Mr Gross wrote in his latest investment outlook published on Friday. “My heart has been with Main Street for many years and there is no doubt that billions of dollars have flowed if only temporarily to the good guys. But the government cavalry is on the march and deservedly so.”

“There is justification to the cries from Senator Elizabeth Warren and future SEC Chairman Gary Gensler to control this new form of social media investing which in and of itself seems democratic, legal, and a wonderful invitation for groups of ‘investment clubs’ to innovate,” he added. “This apparent budding crisis needs regulatory warnings and mainstream media alerts as to the dangers this week, both to overall markets and individual investors.”

Wall Street slides toward worst week in three months

Matthew Rocco

US stocks fell on Friday in a broad sell-off that put Wall Street on pace for its worst week since the end of October, as a buying frenzy in shares of GameStop and other heavily shorted stocks triggered volatile month-end trading.

The benchmark S&P 500 fell 2.3 per cent in afternoon trading in New York, with all 11 sectors posting losses led by energy and technology groups. The tech-weighted Nasdaq Composite was also down 2.5 per cent.

The S&P 500 was on track to drop 3.7 per cent for the week. That would mark its biggest weekly retreat since a 5.6 per cent fall in the last week in October. The Nasdaq was headed for a 4.1 per cent drop this week, which would also be its steepest fall in three months.

GameStop shares were trading at $338.22 on Friday, a 75 per cent gain, after brokerages relaxed curbs that restricted investors’ ability to buy some stocks on Thursday. AMC Entertainment, which has also attracted the attention of retail investors this week, rallied 64 per cent.

The CBOE volatility index, known as the Vix, rose 6.3 percentage points to 36.5.

The yield on the 10-year Treasury note tacked on 0.02 percentage points to hit 1.071 per cent, as investors sold the debt.

Hedge fund Melvin slashes European short bets

Laurence Fletcher

Melvin Capital, the US hedge fund firm caught up in this week’s short squeeze in GameStop, has been slashing its bets against European companies.

The New York-based firm, which takes punchy short positions and which has been singled out by day traders on Reddit, has cut its bet against German pharmaceuticals firm Evotec from 6.2 per cent earlier this week to 2.6 per cent on Thursday, according to regulatory filings and data group Breakout Point.

It has reduced its short position in battery maker Varta from 4.4 per cent to just under 0.5 per cent, and has also cut its bet against Polish video game firm CD Projekt.

Earlier this week Melvin was forced to seek a $2.75bn cash injection from Citadel and Point72 after suffering a loss of around 30 per cent.

Barclays’ curb on FX transactions blocks some UK investors from US stocks

Madison Darbyshire

Barclays has placed limits on currency exchange in a move that has blocked UK investors out of the US equities market on some retail investment platforms.

Banks have moved to cut foreign exchange transactions by as much as 90 per cent in response to a leap in trading volumes as some investors try and access popular US stocks.

FreeTrade, a low-fee trading platform in the UK was forced to suspend trading in US shares. It said, due to an “unexpected decision by our FX provider to limit our volume of trades.”

“We received no warning of what we consider an extremely poor decision. We are deeply unhappy with this decision and we are doing everything possible to rectify the situation,” FreeTrade said in a statement.

The platform said that keeping US markets open with the restrictions, given the high volumes of trades customers have made this week, would have pushed orders into Saturday morning to clear. Customers are still able to sell shares.

FreeTrade uses Barclays client CurrencyCloud to handle its FX transactions.

Barclays declined to comment on the decision.

A person familiar with the situation said that while CurrencyCloud has always had a limit on their usual run rate, they rapidly exceeded it with the extraordinary spike in transactions in the market. They added that banks maintaining limits on currency clients is the prudent thing to do, and trading limits are still significantly higher than they were at the start of the week.

GameStop surges as Wall Street closes worst week since October

Matthew Rocco

Wall Street wrapped up its worst week in three months on Friday, after a frenzy of interest in GameStop and other heavily shorted stocks brought on a bout of volatility.

The large-cap S&P 500 dropped 1.9 per cent in a broad sell-off led by the energy and technology sectors. The tech-weighted Nasdaq Composite was down 2 per cent. For the week, the S&P 500 and Nasdaq fell 3.3 per cent and 3.5 per cent, respectively, their steepest declines since the last week in October.

Its losses on Friday also cemented the S&P 500’s first month in negative territory since October, with a January decline of 1.1 per cent.

GameStop rallied 68 per cent to $325, rebounding from its first fall in six days after brokers loosened curbs on investors’ ability to buy shares in the video game retailer and other hot stocks. GameStop has jumped more than 16-fold from its closing value on January 12.

AMC Entertainment and Express, two other stocks that became favourites on Reddit message boards and among retail investors, also surged in value on Friday. AMC gained 54 per cent, while Express was up 28 per cent.

The Vix, a gauge of market volatility, rose 2.9 percentage points to 33.1.

The yield on the 10-year Treasury note gained 0.02 percentage points to 1.08 per cent, as traders sold the debt.

Texas attorney-general begins probe into trading restrictions

Kiran Stacey

The Texas attorney-general has begun investigating a group of companies after they acted to restrict trading in certain equities following this week’s market volatility.

Ken Paxton has written to several companies, including Robinhood, the online brokerage, asking why they took action which helped curb trades earlier this week after retail traders forced share prices in some companies sharply higher.

The companies included brokerages and clearing houses which placed curbs on trading in shares such as those in GameStop, which have surged over 100 per cent this week following frantic buying from users of Reddit message boards. And it also included the Discord messaging app, which temporarily banned the Reddit group r/WallSteetBets, on which many of the retail traders have discussed their trades.

Mr Paxton’s office said in a statement: “Following the GameStop stock surge, [these] companies took extraordinary and unusual steps to limit access to the market, including forcibly closing off access to American citizens attempting to make trades and investments.”

r/WallStreetBets throws down challenge to regulators

Robert Armstrong

The simplest and most common form of stock fraud is the “pump and dump.” It has three parts. Someone gets hold of some cheap shares; tells lies about why they are going to rise; and when they do, sells them, before the lies are discovered and the shares fall. This is against the law. 

But what if we take out the middle step — the lying? Instead of spinning falsehoods about the shares, our perpetrator shouts to anyone who will listen: “If we all buy these cheap shares, then the price will go up, and we’ll make money.”

The reason to write about this now, of course, is Robinhood, Reddit and GameStop.

The third step still has to happen, of course. When everyone sells to take profits, the shares will fall, and some people will lose a bundle. So far from denying this fact, however, our perp points it out. “This is a dangerous game,” he says, “your timing better be good.”

This form of stock manipulation may seem unlikely to succeed, but it has been done.

Read more here

Robinhood tightens trading limits for hot stocks

Peter Wells

Robinhood has tightened buying limits on several hot stocks like GameStop and expanded to more than 50 its list of US equities and options that are subject to trading restrictions.

Users of the app wanting to buy GameStop will now be subject to an aggregate limit of one share, according to an update from Robinhood on Friday afternoon, down from five previously. The limit for options contracts on the video game retailer is now five.

Robinhood said these thresholds are “aggregate limits for each security and not per-limit orders, and include shares and options contracts that you already hold.”

An investor with an existing position in the company that exceeds the new thresholds will not be forced to sell securities in order to meet that level, but Robinhood said investors will not be able to open more positions on these stocks or options “unless you sell enough of your holdings such that you are below the respective limit.”

Investors in companies that have proved popular with Reddit readers such as AMC Entertainment, American Airlines, Bed, Bath & Beyond and Koss are now subject to a one-share limit, representing substantial cuts from earlier thresholds.

Pharmaceuticals company Jaguar Health and electric vehicle maker Workhorse Group were added to Robinhood’s list of stocks subject to position limits, which now exceeds 50.

Silver Lake pockets $100m after converting AMC debt into shares

Joe Rennison and Sujeet Indap

Private equity group Silver Lake has pocketed over $100m from its stock position in AMC Entertainment after taking advantage of a reddit-fueled run up in the company’s value by converting $600m of debt to equity.

Silver Lake sold over 44m shares on Wednesday, regulatory filings show. AMC’s stock price soared over 300 per cent on Wednesday to $19.90, smashing through a trigger price of $13.51 for the private equity firm to convert its debt into equity.

The regulatory filings show Silver Lake executed the transactions at a weighted average price of $16.05, generating total proceeds of over $700m.

Volatile trading continued on Thursday and Friday as day traders were locked out of further stock purchases, with AMC’s stock price finishing the week at $13.30.
Last Friday, AMC shares closed below $4. On Monday the company announced it had raised more than $900m through debt and equity financings in recent weeks, enough to keep it afloat for several more months.

Silver Lake has separately sold a further $100m of senior AMC bonds, marking a retreat from a storied company by one of its major creditors.

Silver Lake did not immediately respond to a request for comment.

Interactive Brokers removes restrictions for options on hot stocks

Peter Wells

Interactive Brokers said that previously announced restrictions on options of actively-trade stocks like GameStop and AMC Entertainment have been removed.

The retail brokerage was among those on Thursday that announced restrictions, curbing options trading on hot stocks including BlackBerry, Express and Koss due to what it described as “extraordinary volatility in the markets”. It also said it would require 100 per cent margin on long stock positions, and a 300 per cent margin for short stock positions “until further notice.”

On Friday evening, nearly two hours after the closing bell on Wall Street, the Connecticut-based group said in a twitter message that hose restrictions had now been removed.