Budapest Post

Cum Deo pro Patria et Libertate
Budapest, Europe and world news

The GameStop short squeeze was 'the grand awakening': expert

What happened this past week with GameStop, Reddit and Robinhood is a classic tale of David and Goliath, but even the pros say this time is different.

It’s ironic that a trading platform whose motto is “Investing for Everyone” would find itself at the center of a retail investor revolt against the Wall Street glitterati. What happened this past week with GameStop (GME), Reddit and Robinhood is a classic tale of David and Goliath, but even the pros say this time is different.

“We've seen short squeezes in the past, but I call this one the grand awakening,” Kevin Simpson, portfolio manager at Capital Investment Management, told Yahoo Finance Live. “Seeing this mass chat room chatter do something that we've never seen before is a little bit reminiscent of the Yahoo chat boards from the 1990s. But this is something totally different.”

That’s because this time, the power of Reddit drove the revolt at lighting speed. An army of small investors sent shares of depressed companies like GameStop and AMC (AMC) up into the stratosphere, hurting the billionaire hedge funds that bet against those stocks.

The commission-free pioneer broker, Robinhood, then temporarily barred investors from buying GameStop and other heavily shorted stocks, leaving them no choice but to hold their position or sell. Meanwhile, hedge funds were free to trade those same stocks, without restrictions.

Robinhood’s decision to halt trading led to at least two class action lawsuits, claiming the trading platform rigged the market against them and in favor of the Wall Street bigwigs. Robinhood CEO Vlad Tenev told Yahoo Finance Live that the platform restricted trading to protect the firm and its customers.

Joshua Mitts, a Columbia law professor who has written extensively about securities law, said there’s little evidence such restrictions serve to protect retail investors. “This is but the latest iteration in a long string of frustrations that retail investors have encountered when they try to compete with the pros on Wall Street,” he told Yahoo Finance Live.

Mitts said retail investors have been getting systematically burned by hedge funds for years, to the tune of tens of billions of dollars.

“So, when Robinhood steps up and in effect restricts retail investors from doing the same thing that these shortsighted hedge funds can do through their prime brokerage accounts, it does raise profound questions of equity,” Mitts said, adding there needs to be policy reform to ensure a more level playing field for small investors.


In this Wednesday, Dec. 2, 2015, photo, Robinhood co-founders Vlad Tenev, left, and Baiju Bhatt pose at company headquarters in Palo Alto, Calif. Robinhood is a stock brokerage that does not charge any commissions for its more than 1 million customers to buy and sell shares. "During the next 10 years, we are going to create an international company that will be like nothing the financial services industry has ever seen," says Bhatt.


“The question is whether the infrastructure treats them fairly. Whether the rules of the road that apply to retail apply equally to hedge funds. That's what's undermining retail confidence in companies like Robinhood,” he said.

Still, Mitts said the Robinhood lawsuits face an uphill battle.

“The customer agreement that every Robinhood customer agrees to when they install the app does allow Robinhood to suspend trading and deny trading at any time,” he said. “But Robinhood is subject to broader regulatory obligations.”

Mitts said the Securities and Exchange Commission (SEC) needs to “step up and scrutinize the level of risk taking and precautions that are in place when brokers offer apps like these to retail investors.”

Platforms like Robinhood have a fiduciary duty to their customers to execute trades at the best available price, he said.

Fintech is still a relatively new industry, and Simpson said last week’s frenzied trading is part of its growing pains.

“It's still a new platform,” said Simpson. “I think it's a platform that's engaging lots of new investors, both of which are learning as they go. I think the regulation that can come from this will only be more healthy to make sure it doesn't happen again in the future.”

AI Disclaimer: An advanced artificial intelligence (AI) system generated the content of this page on its own. This innovative technology conducts extensive research from a variety of reliable sources, performs rigorous fact-checking and verification, cleans up and balances biased or manipulated content, and presents a minimal factual summary that is just enough yet essential for you to function as an informed and educated citizen. Please keep in mind, however, that this system is an evolving technology, and as a result, the article may contain accidental inaccuracies or errors. We urge you to help us improve our site by reporting any inaccuracies you find using the "Contact Us" link at the bottom of this page. Your helpful feedback helps us improve our system and deliver more precise content. When you find an article of interest here, please look for the full and extensive coverage of this topic in traditional news sources, as they are written by professional journalists that we try to support, not replace. We appreciate your understanding and assistance.
Newsletter

Related Articles

0:00
0:00
Close
Elon Musk Unveils Grokipedia: An AI-Driven Alternative to Wikipedia
Russia’s President Putin Declares Burevestnik Nuclear Cruise Missile Ready for Deployment
US Administration Under President Donald Trump Reportedly Lifts Ban on Ukraine’s Use of Storm Shadow Missiles Against Russia
White House Announces No Imminent Summit Between Trump and Putin
China Presses Netherlands to “properly” Resolve the Nexperia Seizure as Supply Chain Risks Grow
Merz Attacks Migrants, Sparks Uproar, and Refuses to Apologize: “Ask Your Daughters”
Apple Challenges EU Digital Markets Act Crackdown in Landmark Court Battle
Shouting Match at the White House: 'Trump Cursed, Threw Maps, and Told Zelensky – "Putin Will Destroy You"'
‘No Kings’ Protests Inflate Numbers — But History Shows Nations Collapse Without Strong Executive Power
"The Tsunami Is Coming, and It’s Massive": The World’s Richest Man Unveils a New AI Vision
EU Moves to Use Frozen Russian Assets to Buy U.S. Weapons for Ukraine
Europe Emerges as the Biggest Casualty in U.S.-China Rare Earth Rivalry
“Firepower” Promised for Ukraine as NATO Ministers Meet — But U.S. Tomahawks Remain Undecided
The Sydney Sweeney and Jeans Storm: “The Outcome Surpassed Our Wildest Dreams”
Dutch Government Seizes Chipmaker After U.S. Presses for Removal of Chinese CEO
AI and Cybersecurity at Forefront as GITEX Global 2025 Kicks Off in Dubai
Ex-Microsoft Engineer Confirms Famous Windows XP Key Was Leaked Corporate License, Not a Hack
Hungarian Prime Minister Viktor Orbán stated that Hungary will not adopt the euro because the European Union is falling apart.
Mayor in western Germany in intensive care after stabbing
Australian government pays Deloitte nearly half a million dollars for a report built on fabricated quotes, fake citations, and AI-generated nonsense.
BYD’s UK Sales Soar Nearly Nine-Fold, Making Britain Its Biggest Market Outside China
Latvia to Bar Tourist and Occasional Buses to Russia and Belarus Until 2026
Wave of Complaints Against Apple Over iPhone 17 Pro’s Scratch Sensitivity
Munich Airport Reopens After Second Drone Shutdown
Pro Europe and Anti-War Babiš Poised to Return to Power After Czech Parliamentary Vote
Sean ‘Diddy’ Combs Sentenced to Fifty Months in Prison Following Prostitution Conviction
Altman Says GPT-5 Already Outpaces Him, Warns AI Could Automate 40% of Work
Russian Research Vessel 'Yantar' Tracked Mapping Europe’s Subsea Cables, Raising Security Alarms
Global Cruise Industry Posts Dramatic Comeback with 34.6 Million Passengers in 2024
U.S. Demands Brussels Scrutinize Digital Rules to Prevent Bias Against American Tech
Private Equity’s Fundraising Surge Triggers Concern of European Market Shake-Out
Tokyo’s Jimbōchō Named World’s Coolest Neighbourhood for 2025
European Officials Fear Trump May Shift Blame for Ukraine War onto EU
The Personality Rights Challenge in India’s AI Era
Italy Considers Freezing Retirement Age at 67 to Avert Scheduled Hike
Italian City to Impose Tax on Visiting Dogs Starting in 2026
Study Finds No Safe Level of Alcohol for Dementia Risk
Trump Says Ukraine Can Fully Restore Borders with NATO Backing
Europe Signals Stronger Support for Taiwan at Major Taipei Defence Show
Germany Weighs Excluding France from Key European Fighter Jet Programme
Cyberattack Disrupts Check-in and Boarding Systems at Major European Airports
Björn Borg Breaks Silence: Memoir Reveals Addiction, Shame and Cancer Battle
When Extremism Hijacks Idealism: How the Baader-Meinhof Gang Emerged and Fell
JWST Data Brings TRAPPIST-1e Closer to Earth-Like Habitability
Trump Orders $100,000 Fee on H-1B Visas and Launches ‘Gold Card’ Immigration Pathway
France’s Looming Budget Crisis and Political Fracture Raise Fears of Becoming Europe’s “Sick Man”
Three Russian MiG-31 Jets Breach Estonian Airspace in ‘Unprecedentedly Brazen’ NATO Incident
European manufacturers against ban on polluting cars: "The industry may collapse"
Turkish car manufacturer Togg Enters German Market with 5-Star Electric Sedan and SUV to Challenge European EV Brands
Christian Brueckner Released from German Prison after Serving Unrelated Sentence
×