Is the Free Market Doomed? Wall Street Fires Back at Main Street

GameStop was worth $1.3 billion at the end of 2020. Short sellers have lost over $5 billion so far in 2021.

The Reddit group WallStreetBets, with over 4.4 million members, banded together to take down short-sellers, which has resulted in one of the most epic short squeezes ever recorded.

Wall Street hedge funds have lost billions trying to profit from the falling share prices of GameStop Corp. (NYSE: GME), AMC Entertainment Holdings, Inc. (NYSE: AMC), BlackBerry Limited (NYSE: BB), Nokia Corporation (NYSE: NOK), and others.

Retail traders have been buying these stocks relentlessly in order to squeeze the short seller and force them to cover their positions for a loss.

But Wall Street fired back this morning by restricting buying on many of the hottest plays in the market but still leaving shareholders the option to sell.

The popular trading app Robinhood stated in a blog post, “we are restricting transactions for certain securities to position closing only, including $AMC, $BB, $BBBY, $EXPR, $GME, $KOSS, $NAKD and $NOK.”

There are reports that TD Ameritrade, Interactive Brokers, and E-Trade have joined Robinhood in restricting some trading on AMC and GME.

With retail traders unable to buy but still allowed to sell, the market is now tilted in favor of the short sellers.

The action has caught the eye of lawmakers. Democratic Congresswoman Rashida Tlaib called for an investigation in what she called “Robinhood’s market manipulation.”

Legendary penny stock trader Timothy Sykes, who thrives on market volatility, was blown away. He described the action taken by brokerages as “sad” and pointed out it was intended “to hurt the little guy.”

Share prices in many of these hottest plays tumbled this morning once the restrictions went into effect.

This is a historic time for the stock market and one of the first times retail investors have banded together to take on the giants of Wall Street. 

To be clear, hedge funds have always counted on the retail traders to take the other side of their trades. But with the shoe on the other foot, it appears they’re working to rewrite the rules of the game.

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