The “Reddit rally” continued in full swing on Wednesday when officials began to doubt whether they were dealing with a populist market uprising or something sinister.
Shares GameStop and AMC Entertainment posted one-day gains of 134 percent and 301 percent, respectively – just the latest in what Reddit message boards described as a ‘war’ between novice investors and Wall Street elites that shorted shares to make a profit by potential stock . daal.
“I want to help with this movement and will keep the line!” one user recently wrote about his investment in video retailer GameStop.
But when asked about the dizzying heights that stocks like GameStop are reaching, Nasdaq CEO Adena Friedman raised the possibility of foul play.
Freidman told CNBC that regulators should question whether the “social media activity” behind recent stock rises could be a form of market manipulation known as a pump-and-shower scheme.
TD Ameritrade has also had problems announcing new restrictions on popular stock transactions such as GameStop and AMC. The retail brokerage said it added the trade restrictions “to reduce the risk to our company and customers.”
White House Press Secretary Jen Psaki also walked in, saying “Secretary Yellen and others are monitoring the situation,” while Federal Reserve Chairman Jerome Powell asked a question about GameStop during his press conference after the Federal Open Market Committee meeting. avoid.
GameStop’s shares have risen more than 700 percent in recent weeks, sending its market capitalization from about $ 1 billion to $ 24 billion on Wednesday.
The protest is fueled by anonymous posters spewing populist rage on the Wall Street machine, trying against GameStop and other stocks and not betting.
Despite the concerns, Wall Street pros seem to believe they were simply beaten by the masses. These include Andrew Left of Citron Research, whose January 21 video, which predicts GameStop shares would fall to $ 20 a share, only led to a doubling of Reddit posters, which put intense pressure on the stock resulted in.
“It’s not a pump-and-dump if there are just a lot of people buying and buying,” Left told The Post on Wednesday. “These are flash mobs who do not respect the market and they have made the lowest form of gambling.”
Left, who reported threats against himself and his family to the FBI, said he had abandoned his failed attempt to shorten the stock. The hedge fund Melvin Capital apparently also closed its short position in GameStop after taking a big loss.
Other hedges say they agree with Left. “More power for the WallStreetBets crowd,” sighs Thomas Thornton of Hedge Fund Telemetry. ‘They figured out how to play the system, how to beat the shorts, and they won. Congratulations to them. ”
“It’s not fraud, it’s not market manipulation, it’s not illegal,” said Francis Curran, a security lawyer at Kudman Trachten Aloe & Posner. “It’s not a cold room. It is a spontaneous online revolution and the other side of these industries seems very unhappy about it. ”