The GameStop share increases as Robinhood lifts certain trading restrictions
Shares in GameStop and several other speculative stocks such as the theatrical chain AMC and BlackBerry recovered on Friday, extending overnight gains after the online trading platform Robinhood said late Thursday that it will resume limited trading of restricted securities.
GameStop increased almost 72% to $ 336, after tearing 44% to close at $ 193.60 on Thursday. Shares in the video game chain fell a day earlier after Robinhood and other trading platforms took steps curb wild trade fluctuations in short-circuited stocks, which made many customers angry.
Shares in the bio chain AMC and BlackBerry which has become the target of online merchants gyrated as well.
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The move came after a series of trades by small investors from the video game provider damaged hedge funds that bet that the stock would fall. But at the end of Thursday, Robinhood said it would allow limited purchases of these stocks.
“We continue to monitor the situation and can make adjustments as needed,” Robinhood said Thursday.
It’s been a dizzying week for GameStop. All wild action drove GameStop shares as high as $ 483 this week, up from $ 18 just a few weeks ago. It is 198% higher for the week leading up to Friday.
On Thursday, shares in AMC Entertainment and BlackBerry fell by 56% and 41% respectively after the trading restrictions. AMC collected 50% on Friday and BlackBerry climbed 8%.
Elsewhere, the Dow Jones Industrial Average fell 390 points after Johnson & Johnson said its single-dose coronavirus vaccine was less effective against certain COVID-19 variants. Wall Street’s benchmark S&P 500 index also opened lower and fell 1.1%.
David Trainer, CEO of New Constructs, an investment research firm, does not expect the volatile situation with stocks like GameStop to end well for some small investors. He reckons that after GameStop’s meteoric rise, it is likely to fall back to around $ 40 to $ 50 per share because he does not think the company’s current valuation is justified due to its earnings and growth forecasts.
“The plot of GameStop’s stock is a game of music chairs and my advice to investors is to sell before the music stops,” Trainer said in a note. “As unclear as the trading crowd has been to choose GameStop as one of their favorite stocks, they can be just as uneven when it comes to letting the stock fall.”
“While I do not believe the rise in GameStop equities is a signal of euphoria in the broader stock market, the illumination of this ruthless and unethical trading environment may be the catalyst behind a short-term correction of the stock market,” Trainer added.
Investors saw increased viral infections in Europe and Asia, renewed travel margins and negotiations in Washington on President Joe Biden’s proposed $ 1.9 trillion financial aid package. Hopes are high for Biden’s aid package, but concerns grew that the plan could be reduced under pressure from Republican lawmakers.
In early trading, the FTSE 100 in London fell 1% to 6,457.27 while the Frankfurt DAX lost 1.1% to 13,510.71. The CAC 40 in Paris tumbled 1.3% to 5441.20.
In Asia, the Shanghai Composite Index lost 0.6% to 3,483.70 and the Hang Seng in Hong Kong fell 0.6% to 28,369.67.
Contributing: Associated Press
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