Robinhood pauses the buying of GameStop shares

Bank review, current USBR score and consumer report

This is the web version of Term Sheet, a daily newsletter on the biggest deals and dealmakers. Sign up to get it delivered free to your inbox. 

Only in 2021.

In recent days, Reddit users have driven up shares of much-shorted stocks, especially those of GameStop, a video game retailer. They squeezed hedge funds and enabled massive losses for the likes of Steve Cohen and Dan Sundheim.

Now, stock-trading apps such as Robinhood have paused purchases on such shares.

“We continuously monitor the markets and make changes where necessary. In light of recent volatility, we are restricting transactions for certain securities to position closing only, including $AMC, $BB, $BBBY, $EXPR, $GME, $KOSS, $NAKD and $NOK. We also raised margin requirements for certain securities,” Robinhood revealed in a blog post on Thursday, referencing shares of AMC Entertainment, BlackBerry, Bed Bath & Beyond, Express, GameStop, Koss Corp., Naked Brand Group, and Nokia.

Interactive Brokers and TD Ameritrade have also placed restrictions on the trading of BlackBerry and GameStop shares.

The stock-trading companies are facing the same existential question social-media companies are contending with. One has the ability to destabilize an election, another, the stock market. It’s speculated that the recent market volatility is a result of hedge funds selling off shares to cover short positions that are in danger due to the latest rallies.

But Robinhood, in particular, has made a name for itself by emphasizing the democratization of access to finance. Its decision to curtail trades on GameStop has elicited cries of outrage on social media. “Maybe maybe don’t hedge (lol) your entire brand on the promise of “democratizing finance for all” if you’re not going to do that in the single moment that matters most,” one Twitter user wrote following the news of Robinhood’s decision.

How will regulators respond in this new era of the internet? President Joe Biden is expected to take a tougher look at regulating misinformation on social-media platforms, and the GameStop saga is fanning claims of market manipulation in what some view as a pump-and-dump scheme. In a characteristically vague message released Wednesday, the Securities and Exchange Commission said it was aware of the ongoing volatility and was “working with our fellow regulators to access the situation.”

The market is a mess, yes. But in much of the media, the story has been distilled into a fight between the wealthy and the average man. It certainly misses out on the fact that the run in GameStop shares has also been supported by big investors who will gain quite a bit financially.  

Still, in this new age, I wonder whether the SEC may find itself at the center of a trickier case than it seems.

ROBERT DOWNEY JR HAS A ROLLING FUND: Robert Downey Jr., famous for his lead role in the Avengers series, is launching venture-capital funds focused on environmentalism and sustainability. Read more.

11 Things You Should Know Before You Get Your First Credit Card

A credit card may seem like just another tool to help you make purchases, but it can be much more. When used responsibly, a credit card can help you build

What Is a Balance Transfer, and Should I Consider Doing One?

In a perfect world, no one would carry a balance on their credit card. We would all pay our bills in full each month and never have to worry about

How Is Credit Card Interest Calculated?

So your bank tells you that your credit card has a 15% APR. What does that actually mean? How does your bank calculate your interest rate, and how does that translate into how much you actually pay? …

What Is a Balance Transfer, and Should I Consider Doing One?

In a perfect world, no one would carry a balance on their credit card. We would all pay our bills in full each month and never have to worry about

Subscribe to our e-mail list and stay up-to-date with all our news.

The US Bank Review is an independent authority and bank watchdog group monitoring financial institutions operating the in United States. We have no affiliation with any banks featured, reviewed or profiled. All rights reserved. Terms of use and Privacy Policy