Elon Musk brands shorting stock a ‘scam’ following GameStop trading restrictions
Online trading platforms including Robinhood and Interactive Brokers have restricted trading in shares of GameStop, Blackberry and other companies that have seen Reddit-driven hefty gains this week.
The news left Reddit users of forum r/wallstreetbets spitting with rage: “Can you say ‘CLASS ACTION LAWSUIT?’” wrote one, adding: “F*** you Robinhood”.
Others urged fellow Redditors not to sell their GameStop stock: “If you try and sell you will get f***** because who are you going to sell it to if nobody can buy it? They are trying to make you flood the market with sales offers and bring the price down. Don’t fall for it!”
GameStop shares fell today after a bull run that saw the US videogame retailer’s stock pushed up 700 per cent in just two weeks.
The stock had a volatile day, falling then climbing again before levelling out.
The price of shares in GameStop exploded after a group of Redditors made it their mission to drive up the price of the stock in response to hedge funds taking a short position on the US videogame retailer.
The battle has been ongoing for days, and so far, the amateur Reddit traders have outwitted the corporates, having driven the price of the stock to dizzying heights and instigated a short squeeze that forced the hedge funds to take heavy losses as they unloaded short positions.
New York hedge fund Melvin Capital took out a large short position in GameStop and has reportedly been bailed out with more than $2bn to cover its losses.
Billionaire founder of Tesla and Space X Elon Musk, an icon to many Reddit users caught up in the short-squeeze, described shorting as a “scam”.
He tweeted: “U can’t sell houses u don’t own u can’t sell cars u don’t own but u *can* sell stock u don’t own!? this is bs – shorting is a scam legal only for vestigial reasons.”
Commonly used and low-cost trading platforms like Robinhood and Interactive Brokers have today restricted trading of stocks favoured by the Redditors, including GameStop, Blackberry and cinema chain AMC.
Robinhood has been hit with a class action, according to reports, alleging the trading app “deprived their customers of the ability to use their service,” in an effort “to manipulate the market for the benefit of people and financial intuitions.”
Earlier today Interactive Brokers tweeted: “Interactive Brokers has put AMC, BB EXPR, GME, KOSS option trading into liquidation only due to the extraordinary volatility in the markets. In addition, long stock positions will require 100% margin and short stock positions will require 300% margin until further notice.
In a separate tweet the brokerage added: “We do not believe this situation will subside until the exchanges and regulators halt or put certain symbols into liquidity only. We will continue to monitor market conditions and may add or remove symbols as may be warranted.”
The share price of AMC and Blackberry also fell today.
Nigel Farage, himself a former City trader-turned-politican, came out publicly in favour of the Reddit users, tweeting it was “outrageous” that brokers were suspending the trading of certain stocks.