A sign hangs in front of an AMC theater on January 27, 2021 in Chicago, Illinois. Shares of AMC Entertainment have quadrupled today as investors continue to buy sharply shortened shares.
Scott Olson | Getty Images
In addition to GameStop, other popular short-squeeze targets among Reddit traders had big hits on Tuesday.
Shares of AMC Entertainment, which rallied nearly 300% last week due to a major short spill, fell about 50% in morning trades. The iShares Silver Trust ETF, part of a metal tightening attempt, fell 6%.
In other very short-circuited names that gathered last week, BlackBerry fell 10%, Express fell 31%, Koss fell 41%, Naked Brand lost 27% and Nokia fell 5% in a short time after the opening bell. Genius Brands was down 3%.
Short selling is a strategy in which investors borrow shares of a stock at a certain price, depending on expectations that the market value will fall below that level when it is time to pay for the borrowed shares. It is a strategy often used by hedge funds.
Amid last week’s retail investment rage in heavily shortened names, Reddit-powered traders led stocks of GameStop, AMC Entertainment, Koss and others, raising speculative funds that shorten the name. This week, those shares return to Earth as Robinhood and other trading applications continue to limit the purchase of stock and option contracts and as the discount transaction has lost momentum.
The Cash’s Square app, which gathered some frustrated customers from Robinhood last week, just announced that the clearing broker, Axos, is stopping the acquisitions of AMC Entertainment and Nokia.
GameStop shares fell more than 60% on Tuesday.
Currently, Robinhood allows customers to buy only 20 GameStop shares and 350 AMC Entertainment shares. Customers can with 700 Blackberry shares and 1,000 Koss shares. However, if Robinhood customers hold more than the share limit, they cannot buy shares.
Robinhood and other brokers are required to meet certain deposit requirements from clearing companies. Due to the large trading volume, Robinhood said last week that it must impose restrictions because the deposit requirements set by the clearing house were much higher than expected.
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