Class-action lawsuit filed against Robinhood following outrage GameStop stop

Home Forums PC & Laptop Gaming … Other Stuff etc. Class-action lawsuit filed against Robinhood following outrage GameStop stop

Viewing 2 posts - 1 through 2 (of 2 total)
  • Author
    Posts
  • #11734
    UK Sentinel
    Moderator
    • Posts 3437
    • Skipper

    Oops! Melvin Capital A $13bn hedge fund “short squeeze”

    New York (CNN Business)A Robinhood customer filed a class-action lawsuit against the stock-trading app Thursday after the company barred traders from buying shares of GameStop promoted by WallStreetBets, a popular Reddit group for investors.

    The lawsuit, filed in the Southern District of New York, claims that Robinhood’s actions rigged the market against its customers.

    “Robinhood’s actions were done purposefully and knowingly to manipulate the market for the benefit of people and financial institutions who were not Robinhood’s customers,” the lawsuit states.

    Robinhood did not respond to a request for comment. The company imposed the stock-trading restrictions Thursday citing “recent volatility.” The company said in a blog post it will only allow users to close out their positions in those stocks, which include GameStop (GME), AMC (AMC), Bed Bath & Beyond (BBBY), and Nokia (NOK).

    Following the decision Thursday, shares of GameStop fluctuated wildly.

    The lawsuit claims Robinhood’s decision deprived retail investors of potential gains they could have made by buying when the stock was low and selling when its price rose.

    GameStop’s stock has soared since January 11 after it hired several new board members that investors believed could help the stock boost its digital sales. Reddit’s WallStreetBets group began promoting the stock, sending it soaring more than 1,000% over the past several weeks.

    The stock’s surge forced short-sellers who were betting against the stock to buy shares to hedge their positions, sending the stock soaring even higher.

    Many day traders took advantage of Robinhood’s free trades, placing bets on GameStop and other stocks the Reddit group promoted. But those customers are playing a dangerous game. The companies’ fundamentals don’t support such elevated stock prices, and the bubble could burst, wiping out the traders who had placed big bets on GameStop and the like.

    “We’re committed to helping our customers navigate this uncertainty,” the company said in a statement. “We fundamentally believe that everyone should have access to financial markets.”

    Robinhood published another blog post Thursday afternoon saying it would “allow limited buys of these” stocks starting Friday.

    Redditors band together
    Following Robinhood’s decision earlier Thursday morning, Redditors stood up a new forum, r/ClassActionRobinHood, to coordinate efforts for a lawsuit. It collected more than 31,000 users Thursday.

    One law firm that Redditors have engaged with is ChapmanAlbin LLC, based in Cleveland, Ohio, which specializes in investments and financial fraud. The firm’s homepage currently has a prompt titled, “Are you a Robinhood user who has suffered losses?” along with a way for people to submit information.

    The firm has collected information from more than 6,000 people as it investigates Robinhood, attorney Philip Vujanov told CNN.

    “This is pretty unprecedented, I’ve never heard of another scenario like this,” Vujanov told CNN in a phone interview. “There’s going to be a lot of people left holding the bag.”

    Vujanov specifically called Robinhood’s actions today “disingenuous” while citing a tweet from Robinhood’s official Twitter account in March 2016 that stated, “Let the people trade.”

    “Now, all of a sudden, they are changing their position,” Vujanov said regarding Robinhood.

    One avid Wallstreetbets user dismayed over Robinhood’s decision was Christopher Kardatzke, 21, a recent college graduate who, along with his brother, have developed free financial software used by Redditors to guide their investment strategy.

    “It seems a bit silly. The people of r/wallstreetbets were buying up GameStop and playing a game of Jenga, but it’s the same game that hedge funds have been playing for decades and decades,” Kardatzke said. “It’s a bit ridiculous.”
    This sentiment was echoed on Capitol Hill where Democratic Rep. Alexandria Ocasio-Cortez and Republican Sen. Ted Cruz were among a group of lawmakers to chastise Robinhood’s decision.

    “We now need to know more about @RobinhoodApp’s decision to block retail investors from purchasing stock while hedge funds are freely able to trade the stock as they see fit,” tweeted Ocasio-Cortez.

    https://edition.cnn.com/2021/01/28/investing/lawsuit-robinhood-gamestop-wallstreetbets/index.html

    In a completely sane world, madness is the only freedom (J.G.Ballard).

    #11735
    UK Sentinel
    Moderator
    • Posts 3437
    • Skipper

    The Short Story:

    A $13bn hedge fund has been left with huge losses after an army of amateur investors coordinating via social media pumped up the price of video game retailer GameStop tenfold in just a few weeks.

    Melvin Capital had bet against GameStop by short-selling its shares, meaning it stood to gain if the price went down and lose if it went up.

    Members of the Reddit thread “wallstreetbets” decided to pile in to GameStop with the aim of pushing up the share price to inflict losses on short-sellers including Melvin Capital.

    The move, known as a “short squeeze”, saw GameStop’s shares surge from a little over $17 at the start of the year to almost $150 when trading closed on Tuesday.

    It then more than doubled again in after-hours trading after Tesla boss Elon Musk,  who has had his own battles with short-sellers in the past, tweeted to his 42 million followers “Gamestonk!”.

    Hedge funds and others that bet against GameStop have collectively lost more than $5bn, according to data analytics company S3.

    Melvin Capital boss Gabe Plotkin told CNBC that his fund had closed its position in GameStop on Tuesday. That came after Melvin Capital’s backers Citadel and Point72 pumped almost $3bn into the fund to keep it afloat.

    Another short-seller, Citron Research, was also stung by GameStop’s meteoric rise. Citron boss Andrew Left told Bloomberg he had covered most of his short position “at a loss of 100 per cent”.

    Full Story: https://www.independent.co.uk/news/business/gamestop-share-price-reddit-hedge-fund-melvin-capital-b1793543.html

     

    Robinhood Statement on Options, Collateral, and Margin from wallstreetbets

    In a completely sane world, madness is the only freedom (J.G.Ballard).

Viewing 2 posts - 1 through 2 (of 2 total)
  • You must be logged in to reply to this topic.
UKTechHub.com