This week has been crazy for companies that seem to have been affected from time to time by the COVID-19 pandemic. Of course, we’re talking about GameStop and, to a lesser extent, companies like AMC Theaters and BlackBerry. This is a long story, and we encourage you to catch up on your previous coverage if you are new to all the drama.
The Cliff’s Notes version is that Wall Street hedge funds have been cutting GME shares short for a long time in hopes of the company’s eventual downfall so they can make billions in profits. However, the Reddit community WallStreetBets has decided to keep it to the man by buying shares of GME, which is causing the share price to skyrocket. GME, which by 2020 was trading less than $ 10 a share, is now trading at around $ 325. Needless to say, the “little old” traders who came in early banked while hedge funds shook their boots and in an epic way.
So where does Robinhood and AMD all come into play?
This brings us to Robinhood, which provoked the anger of WallStreetBets, day traders and even lawmakers after announcing that it would restrict transactions for certain securities to position closure only, including $ AAL, $ AMC, $ BB, $ BBBY, $ CTRM, $ EXPR, $ GME, $ KOSS, $ NAKD, $ NOK, $ SNDL, $ TR and $ TRVG. Robinhood claims that it is protecting its customers against ‘significant market volatility’, even though most people who trade in the shares in question know. exactly what they did.
The trading blockade earlier on Thursday led to a 21 percent and nearly 50 percent drop in GME and AMC shares, respectively. [mostly] recovery of losses on Friday.
But one of the companies caught up in this short-selling counterattack / WallStreetBets was AMD. AMD is a company that apparently does not relate to the whole GME drama (except that it makes the CPUs and GPUs that go to consoles), but it has also been placed on Robinhood’s limited inventory list.
On Thursday and Friday, Robinhood limited its users to just a single share in AMD. As you would expect, there was an immediate outcry over this state of affairs. Unlike GameStop, or many of the other companies targeted by Robinhood, AMD actually has a good financial position.
In fact, AMD saw a 45 percent increase in year-on-year 2020 and a 52 percent increase in annual profit to $ 4.35 billion. All of AMD’s business units have been on fire from standalone Ryzen and Radeon GPUs, to its semi-custom chips used in the PlayStation 5 and Xbox Series S / X, to the EPYC data center processors. Despite the huge gains, AMD was greeted with a dramatic drop in its share price and the subsequent intervention of Robinhood.
Why is Robinhood now aimed at AMD?
Redditor Bvllish was one of the first to pay attention to the AMD effect by Robinhood, and exploded the move, saying:
This is important because it is blatant manipulation of AMD’s shares. By restricting purchases on a stock, Robinhood creates artificial selling pressure that can lower the stock price. AMD’s short-term interest rates (number of people betting that AMD’s share price will fall) have also risen over the past month. AMD also happens to be one of the shares most owned in Robinhood. An attack on AMD’s shares is an attack on the company.
Over the past three weeks, AMD has become quite active, with a short interest rate of 52 million earlier in January to a current level of 110 million. Given AMD’s booming finances, WallStreetBets and other retailers smell like a rat (or perhaps shorts that sell long positions on AMD to retain liquidity after hitting GME).
Welcome to the Endgame. from r / wallstreetbets
“Notice how [mainstream media] states that an earnings slump is ‘expected’ to make the statement of the [share price], “added zqv7.” And yet there was no run-up to merit in praising it. Packs that fit suit. “
The fight against Robinhood and shorts is by no means over
The popular opinion seems to be that WallStreetBets and its legion of self-branded “degenerates” are ready to push AMD shares now, and Robinhood does not want to be caught flat-footed. However, these restrictions only help to further increase users’ distrust of the company and to investigate legislators, including the SEC – something that most trading companies try to avoid at all costs.
Robinhood’s mockery grew within days because his actions – though legal – were at odds with a movement determined to tackle the best Wall Street hedge fund businesses. The degenerates are pushing companies that are lucky, while also earning money for themselves.
Flying over Robinhood HQ from r / wallstreetbets
It seems that some “degenerates” even use their newfound wealth to openly mock Robinhood in broad daylight (as shown in the video above). This is a quick prospect for Robinhood, which is praised for its ease of use and accessibility for comfortable traders. However, the twist of Robinhood’s namesake to ‘steal from the rich and give to the poor’ seems to be upside down here, which explains why his feet are now kept on the proverbial fire.
From now on, it appears that AMD has been removed after the announcement of Robinhood’s list of restricted shares, but we do not know if this will still be the case tomorrow when the market officially reopens. Whatever the outcome, the damage to Robinhood’s reputation has clearly already been done, and it will be interesting to look at the fireworks when the SEC takes action against the company next time.