The forum faces regulatory action
Stock market regulators in the US are to review the role of the Reddit investor forum in the recent GameStop stock price surge.
The latest news in the unfolding story of the GameStop share surge has put Reddit at the forefront of a potential regulatory probe. The Securities and Exchange Commission said that they were working with regulators to “assess the situation and review the activities of regulated entities, financial intermediaries, and other market participants”.
GameStop’s share price has skyrocketed over the past week, going from well under $100 (£73.23) on January 21 to a closing price of $347.51 (£254.50) on January 27. Concerns have been raised over investor activism, and several hedge fund short-sellers have been hit with catastrophic losses.
Nasdaq chief Adena Friedman said in a statement obtained by Sky News: “If we see a significant rise in the chatter on social media … and we also match that up against unusual trading activity, we will potentially halt that stock to allow ourselves to investigate the situation.”
A fall in broader US markets has been attributed to hedge funds selling their positions to pay for their losses, and the main Wall Street indexes lost more than 2 per cent on Wednesday 27 January alone. A state regulator has since called for GameStop shares to be suspended for 30 days to allow them to “cool off”.
Investor platform Trading212 has announced on Twitter their intention to close access to new clients, writing: “Due to the unprecedented demand, we have temporarily stopped onboarding new clients.
“Once we process the existing queue, we will be open for new registrations.”
The Reddit community in question was briefly shut down, as mods were overwhelmed with the amount of content. The forum has since been reopened and put out a statement, linking to their official Twitter account.
The account wrote: “People rooting for wsb because it’s not a big institution, organization, or even a hive mind. It’s a gathering place of millions of unique individuals who are tired of being run over by the big guys and are each fighting back in their own way.”
This is a breaking news story and will continue to be updated.