GAMESTOP'S stock price surged 103 percent as the Robinhood app is set to lift restrictions after limiting buying following a Reddit rally, according to reports.
The stock soared to 103 percent at $393.01 in the early hours of Friday morning as the popular stock trading app Robinhood was slammed for stopping users from buying and selling GameStop shares, Bloomberg reported.
Friday's pre-market trading saw GameStop shares, along with AMC Entertainment Inc, spike.
The major increase in GameStop shares come after the Thursday trading day closed with the company down 44 percent.
Despite limited trading rules prompted AMC Entertainment shares to drop 56 percent, the company later rebounded to 70 percent in pre-market trading on Friday.
Amateur investors dramatically increased the share price of GameStop – a US computer games retailer that has been struggling to compete with the shift to online shopping – with a majority of stock purchases coming through trading apps.
In a push to prevent hedge funds from making money on Gamestop's bad performance, a group on the social media website Reddit pushed users to buy the stock to drive up share prices.
RobinHood said in a statement on Thursday: “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.”
The GameStop chaos comes as:
- The popular stock trading app Robinhood stopping users from buying and selling GameStop shares
- Roaring Kitty has made headlines for the part he played in driving a surge in the shares of GameStop Corp
- Dogecoin stock has dropped after its value surged this week
- Protesters attacked Wall Street traders, screaming "shame" and "eat the rich"
The move sparked instant backlash again the trading app.
Meanwhile, Robinhood raised more than $1billion on Thursday from itsoriginal investors, the New York Times reported.
The unexpected rise in amateur investors led Robinhood to take action to sort out its financial requirements.
The Times explained the increased buying and selling "has put a strain on Robinhood, which has to pay customers who are owed money from trades while posting additional cash to its clearing facility to insulate its trading partners from potential losses."
Two unnamed sources told the news outlet Robinhood needed a significant amount of cash fast to prevent added trading limits.
How to invest using the Robinhood App
- Navigate to the stock’s detail page. Here you can find the stock’s historical performance, analyst ratings, company earnings, and other helpful information when considering buying or selling a stock.
- At the bottom of the page, tap Trade and then Buy or just Buy, which will appear by default if you don’t currently own the stock.
- Enter the dollar amount you would like to purchase. If you’d like to order in shares, tap on the drop-down menu in the top right that says Dollars and choose Buy in Shares.
- Review your order and confirm that all the details are correct. If you’d like to edit your order, tap Edit in the top left.
- Swipe up to submit your order.
On Thursday afternoon,Vladimir Tenev – the co-founder and CEO of Robinhood – revealed the company will start allowing limited buys on Friday.
Tenev tweeted: "Starting tomorrow, we plan to allow limited buys of these securities.
"We’ll continue to monitor the situation and make adjustments as needed."
In two follow-up tweets, he wrote: "We cannot control, however, the lightning-fast spread of information and misinformation that takes place on social media, and for that I am incredibly sorry to our customers and staff for this.
"We stand in support of you, our customers. Democratizing finance for all means giving more people access, not less.
"We’ll keep monitoring market conditions and will update this Help Center article with the latest changes."
All this comes as the value of Dogecoin – a cryptocurrency launched in 2013 – has gone down after becoming the target of Reddit traders.
The stock sharing frenzy prompted Robinhood to be hit with "multiple lawsuits" for blocking GameStop and AMC "Reddit rally" trading as companies' shares plummet.
A pair of federal lawsuits were filed on Thursday, blaming the trading platform for alleged market manipulation, Law and Crime reported.
The first suit was filed by user Brendon Nelson in the Southern District of New York, alleging that the app engaged in unlawful market manipulation, the outlet reported.
The second was filed by user Richard Joseph Gatz in the Northern District of Illinois, accusing the platform of protecting “institutional investment at the detriment of retail customers.”
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