A man walks past an AMC theater amid coronavirus disease (COVID-19) in New York City, New York, USA, on January 27, 2021.
Carlo Allegri | Reuters
The shares on Robinhood’s limited trading list jumped during pre-trading on Friday after online brokers said the limited trading would resume in the strongly abbreviated names.
GameStop rose 96%, while Koss rose 93%. AMC Entertainment and Express rose 53% and 44%, respectively. Naked Brand Group achieved 37%.
For some of the stocks, Friday’s rise in the futures market wiped out heavy losses suffered during the previous session after Robinhood and other retail brokers announced restrictions on a handful of stocks, including in some cases that customers could not buy new stocks and only do not sell. GameStop, for example, slipped 44% on Thursday.
Robinhood’s limited list
Robinhood announced in a statement late on Thursday that it would resume trading on the blacklist: “We will continue to monitor the situation and make adjustments as needed.” The company added that its earlier decision to restrict trading – which angered many users – was necessary to meet the capital requirements that the SEC deals with brokers.
Interactive brokers have taken similar steps as Robinhood, and both have also increased the requirements for certain securities. It is not uncommon to increase the margin requirements, but the action to restrict trading was more extreme, which angered and confused some users.
The decision resulted in retail investors flocking en masse to some of the market’s strongest abbreviated names, forcing hedge funds and those on the other side to cover their losses. This drives share prices even higher. Investors have turned to popular forums such as the WallStreetBets board of directors of Reddit to discuss their trading.
Short selling is a strategy in which investors borrow shares of a stock at a certain price in the expectation that the market value will fall below the level when it is time to pay off the borrowed shares.
Two of the top three days with the highest volume dating back to at least 2007 took place this week as the trade frenzy escalated, prompting a number of legislators to consider whether regulatory bodies should act.
Retail investment has risen amid the pandemic, and on Friday Robinhood raised more than $ 1 billion and used credit lines to ensure he had the capital needed to trade in the volatile names.
“By using our credit lines, which we do throughout as part of normal day-to-day operations, we get more capital that we can deposit with the clearing houses, and this will enable us to make more investments with fewer restrictions,” Vlad said. Robinhood CEO Tenev told CNN’s Andrew Ross Sorkin on Thursday night.
AMC apparently also wants to raise additional capital amid the more than 300% jumps in its shares according to Reuters, citing sources. AMC said on Monday that it had raised $ 917 million in new shares and debt since December 14.