A man walks past an AMC theater in the middle of the coronavirus disease pandemic (COVID-19) in the Manhattan neighborhood of New York City, New York, USA, January 27, 2021.
Carlo Allegri | Reuters
Shares on Robinhood’s restricted trading list rose during premarket trading on Friday, after online brokerage said Thursday night it would resume limited trading with those names.
GameStop was up 96%, while Koss Corporation was up 93%. AMC Entertainment and Express increased by 53% and 44%, respectively. Naked Brand Group gained 37%.
For some stocks, Friday’s premarket rise erased large losses in the previous session, after Robinhood and other brokerages announced restrictions on a handful of shares, including in some cases not allowing customers to buy new shares and sell only. GameStop, for example, fell 44% on Thursday.
Robinhood’s restricted list
In a statement late Thursday, announcing it would resume blacklisting shares, Robinhood said: “We will continue to monitor the situation and make adjustments as necessary.” The start-up added that its previous decision to restrict trading – which upset many users – was necessary to comply with the capital requirements imposed by the SEC for broker dealers.
Interactive Brokers has taken similar measures with Robinhood, both increasing the margin requirements for certain securities. It is not uncommon to increase margin requirements, but the move to restrict trading has been more extreme, which has upset and confused some users.
The decision targeted retail investors gathering en masse at some of the market’s strongest names, forcing hedge funds and those on the other side to rush to cover their losses. In turn, this leads to rising stock prices. Investors have turned to popular forums, such as Reddit’s WallStreetBets, to discuss their transactions.
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 that level when it is time to pay for the borrowed shares.
Two of the first three days with the highest volume, dating back at least to 2007, took place this week, as the trading frenzy continued, prompting a number of lawmakers to consider whether regulators should take action.
Retail investment has risen amid the pandemic, and on Friday Robinhood raised more than $ 1 billion and tapped credit lines to ensure it has the capital to trade volatile names.
“By using our credit lines that we always do as part of normal day-to-day operations, we get more capital that we can deposit in clearing houses and that will allow us to ideally invest more, with fewer restrictions.” Robinhood CEO Vlad Tenev told Andrew Ross Sorkin of CNBC on Thursday night.
AMC is also trying to raise additional capital amid jumps of more than 300 percent in its shares this year, according to Reuters, citing sources. On Monday, AMC said it had raised $ 917 million in equity and debt since Dec. 14.