This past year saw riots all over the country in the face of rising political tensions. Now, in the first few months of 2021, we’re seeing an online revolt on the heels of Robinhood and other brokers restricting or outright blocking you from trading certain stocks.
For some background, GameStop Corp. (NYSE: GME), as well as other highly shorted stocks including American Entertainment Holdings Inc. (NYSE: AMC) and Nokia Oyj (NYSE: NOK), among others, have been targets of a short squeeze.
GameStop was the first of a group of stocks targeted by retail investors from a subreddit called “WallStreetBets,” self-described “degenerates” who banded together to “stick it” to Wall Street.
The group noticed that GME was one of the most heavily shorted stocks by hedge funds, and collectively they began purchasing shares. This resulted in a parabolic move in share prices, with GME increasing some 1,600% in a matter of days.
Those kinds of moves don’t just happen. The last time we saw we saw a squeeze like this was in 2018 with Tilray Inc. (Nasdaq: TLRY), a cannabis company that saw its stock shoot up 1,400%.
Now, about a week following the start of the GameStop short squeeze, the news of Robinhood and other brokers restricting and outright banning some trades has ignited a firestorm.
After the “WallStreetBets” crew forced multiple hedge funds into or close to bankruptcy, Robinhood stepped in to put a stop to it.
The California-based start-up company made a name for itself by trying to level the trading field. The pioneers of free trading changed the entire industry, and now it’s not letting users trade freely.
Because it started to affect Robinhood’s revenue.
The e-brokerage company operates without commissions, so its money has to come from somewhere. It comes from Wall Street firms buying your data, including the trades you make.
Robinhood’s biggest source of income? A firm called Citadel, which has lost almost $3 billion as a result of this squeeze…
Check out my short video on how short squeezes happen and get the real reason behind Robinhood blocking stocks.
P.S. Did you lose money or miss out on any big wins because of the restrictions? Are you considering changing brokers now? Share your thoughts on the ongoing short squeeze mania with us at firstname.lastname@example.org, and we could feature your story in an upcoming piece.