Robinhood boss defends GameStop trading restrictions
The Reddit army that last week launched into an extraordinary trading war with Wall Street hedge funds over shares in failing video game retailer GameStop has switched its focus to silver, sending the price of stock in precious metal producers like First Majestic Silver and Fresnillo soaring by 35 per cent and 18 per cent respectively on Monday.
Reddit-propelled buying drove the price of the commodity up by as much as seven per cent to $29.70 an ounce at the start of the new week, its highest value since March 2013 as amateur investors looked to further exert their influence over the markets.
Vlad Tenev, under-fire CEO of trading app Robinhood, has meanwhile accused Elon Musk of “getting into conspiracy theories” after the tech entrepreneur suggested during a livestream interview that established funds and US financial regulators had conspired to rein-in purchases of GameStop shares on Tenev’s platform.
Good morning and welcome to The Independent’s rolling coverage of the Reddit-inspired GameStop trading drama.
Reddit investors eye silver after GameStop frenzy
The army of Reddit users who last week launched into an extraordinary trading war with established Wall Street hedge funds over shares in failing video game retailer GameStop has switched its focus to silver, sending the price of the precious metal soaring on Monday morning.
Reddit-propelled stock buying drove the price of silver up by as much as seven per cent to $28.99 an ounce, its highest value since mid-August 2020 as amateur investors looked to further exert their influence over the markets.
Retail sites and coin-selling sites, however, have warned their customers that there could be delays in meeting the unprecedented demand for silver bars and coins.
This latest development follows the shock rise in GameStop’s share value by 1,700 per cent in a month as followers of Reddit’s WallStreetBets forum worked together to punish Wall Street short sellers from profiting from the demise of a popular high street brand hard-hit by lockdowns prompted by the coronavirus pandemic.
Shweta Sharma has the latest.
Reddit-propelled stock buying drove silver as much as 7 per cent to $28.99 an ounce, its highest value since mid-August
Robinhood CEO denies Musk ‘conspiracy theories’
Vlad Tenev, under-fire CEO of trading app Robinhood, has meanwhile accused Elon Musk of “getting into conspiracy theories” after the tech entrepreneur suggested during a livestream that established funds and US financial regulators had conspired to rein-in purchases of GameStop shares on its platform to avert a crisis.
Musk interviewed Tenev on the Good Time Clubhouse livestream overnight, with the latter moving to shoot down claims that Citadel Securities may have helped to cause an initial $3bn demand for capital from the National Securities Clearing Corporation (NSCC), which was later reduced to $700m.
“From our perspective, Citadel and other market makers weren’t involved in that,” Tenev said.
“Did something shady go down here,” Musk persisted, leading Tenev to answer: “I wouldn't impugn shadiness, Elon, or anything like that.”
The Tesla and SpaceX boss insisted Citadel must “have a strong say” in who is employed at the NSCC.
“I don't have any reason to believe that,” Tenev replied. “You’re getting into conspiracy theories a little bit.”
The Robinhood founder also took the opportunity to pledge “we’ll be able to relax the stringent limits that we put in place on Friday.”
“They came back and said OK the deposit is $700m which we then deposited and paid promptly and everything is fine,” he said of the NSCC demand before adding: “We don't have infinite capital. There is always going to have to be some limit.”
Here’s Ben Chapman on why the Redditors are bring a class action lawsuit against Robinhood.
Court filing claims company acted 'knowingly to manipulate the market for the benefit of people and financial institutions who were not Robinhood's customers’
Hedge fund Melvin Capital loses $7bn over ‘meme stock’ saga
The fund at the centre of the GameStop saga lost more than $7bn last month as a result of the Reddit insurgents, according to The Wall Street Journal.
Melvin Capital closed its position in GameStop at a loss last week as several of its investors including Point 72 and the aforementioned Citadel pumped in $2.75bn to help it end January with $8bn in assets, still down from the $12.5bn with which it began the new year.
The company was founded in 2014 by Gabe Plotkin, who previously worked with Point 72's founder Steven Cohen.
In other news, the price of Dogecoin, a joke cryptocurrency, crashed over the weekend after a spike encouraged by Reddit and a tweet from Elon Musk (that man again) duly collapsed.
Dogecoin had climbed 900 percentage points on Friday to a lifetime high of 8.8 cents per coin after the SatoshiStreetBets forum on Reddit called for it to hit $1 but subsequently fell by as much as 75 per cent over the weekend, trading as low as 2.2 cents per coin as interest waned.
Here’s Ben Chu on why Melvin Capital’s humiliation at the hands of day traders is not necessarily something to cheer about.
It’s easy to cheer the bloody nose given to wealthy hedge fund managers this week. But we also ought to remember some persistent realities about financial markets, not least that short-selling overvalued companies can be socially useful, says Ben Chu
‘It will, I fear, be the small investors who are most badly burnt’
For Indy Premium, here’s Hamish McRae with his lessons to be taken from the GameStop frenzy.
‘It will be the small investors who are most badly burnt’ – lessons from the GameStop story | Hamish McRae
Something will end this bull market. I personally expect that to be a rise in inflation, and hence of interest rates, writes Hamish McRae
GameStop: The Movie already in development
Incredibly, MGM chairman Michael De Luca has already bought the rights to Ben Mezrich’s forthcoming book The Antisocial Network, which he can barely have started writing.
The same author wrote The Accidental Billionaires about the founding of Facebook by Mark Zuckerberg and friends, the basis for David Fincher’s 2009 film The Social Network.
The same director is already being tipped to return.
Isobel Lewis has more.
Ben Mezrich’s book The Accidental Billionaires was adapted into the 2010 Facebook drama
Elizabeth Warren calls Wall Street ‘rigged game’ and demands GameStop probe
The popular Democratic senator for Massachusetts, a former Harvard law professor and candidate for the presidency, was interviewed by Dana Bash on CNN’s State of the Union on Sunday and demanded that the US Securities and Exchange Commission (SEC) launch an investigation into the affair.
“We actually don't know who all the players are in all this - whether there's big money on both sides. That's why we need an SEC investigation,” she said.
“It can't be trying to help the hedge funds at the same time it pretends to help individual investors.
“Understand: What's happening with GameStop is just a reminder of what's been going on on Wall Street now for years, and years and years. It's a rigged game,” she continued.
“We need a market that is transparent, that is level and open to individual investors. It's time for the SEC to get off their duffs and do their jobs.”
This was the response from Brian Deese, Joe Biden’s new director of the National Economic Council, on the same programme.
Defiant Redditors rent Times Square billboard to troll Wall Street as offensive banner flown over Robinhood HQ
It seems the spat has already moved offline with the one-day investors lashing out over online brokerage Robinhood temporarily blocking trades.
Whatever else you might say, you can’t fault these boys for initiative.
IG blocks viral trades ahead of Monday opening
One of the UK’s biggest trading apps, IG, has since followed suit and likewise stopped any new trades in GameStop or cinema chain AMC from taking place when markets open on Monday.
In a statement, IG said: “Due to the recent extreme volatility, and in order to prioritise the service we give our existing clients, we are not allowing any new positions to be opened on the US stocks GameStop and AMC Entertainment.
“These restrictions apply to all IG accounts, and will be reviewed regularly. You will still be able to close any open positions that you have in these stocks. Any orders that you have already placed on these two stocks will remain.”
Shares in GameStop, AMC up in pre-market trading as Goldman Sachs warns staff against ‘manipulation’
The faltering video games retailer and cinema chain have seen their shares jump 6.4 per cent and 18.4 per cent in value respectively in early pre-market trading this morning.
That builds on a rally of more than 400 per cent last week for Gamestop and nearly 200 per cent for AMC.
Meanwhile, US investment banking giant Goldman Sachs has issued a “stern memo” to staff in the wake of the GameStop short squeeze, according to Financial News, reminding its traders not to engage in “manipulation” by hyping up stock on social media or using their profiles to spread rumours likely to further inflame the situation.
With that in mind, here’s an interesting piece on what the recent frenzy has to tell us about Wall Street and the power of online mobs.
It’s a fable for our times: Small-time investors band together to take down greedy Wall Street hedge funds using the stock of a troubled video-game store
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