Skip to main content

WallStreetBets Briefly Goes Private

Chatroom host bans subreddit tied to Gamestop short squeeze
  • Author:
  • Publish date:

The subreddit that has been tied to huge surges in Gamestop  (GME) - Get GameStop Corporation Report and other heavily shorted stocks was set to private briefly Wednesday evening after its online voice and messaging group on Discord was banned.

In a post late Wednesday after new members were again allowed to join, the WallStreetBets moderator(s) said they had seen overwhelming interest following huge short-squeeze surges in Gamestop in recent days. 

Heavily shorted Gamestop has seen its shares soar in recent days as retail investors, apparently coordinating through the WallStreetBets subreddit, have bid up its shares, creating a short squeeze. Short squeezes occur when investors who have borrowed shares and sold them in anticipation a stock will fall instead find the trade going against them.

Melvin Capital, a hedge fund that had taken a large short position in Gamestop told CNBC that it had closed out the position at a huge loss Tuesday. 

"We have grown to the kind of size we only dreamed of in the time it takes to get a bad night's sleep," the WallStreetBets post said. "We've got so many comments and submissions that we can't possibly even read them all, let alone act on them as moderators."

Earlier Wednesday, the r/WallStreetBets “server” was banned by Discord, the voice-over-internet and messaging service that hosted it, The Verge reported. Discord, which originally organized as an online communications platform for video gamers, hosts “servers” including live messaging channels and voice calls that focus on specific games or topics.

Scroll to Continue

TheStreet Recommends

Discord didn’t ban r/WallStreetBets because of financial fraud but instead said it had allowed “hateful and discriminatory content after repeated warnings,” according to the report.

"We're suffering from success and our Discord was the first casualty," the WallStreetBets moderators wrote, adding "if you gather 250k people in one spot someone is going to say something that makes you look bad."

Gamestop shares fell $55.51, or 16%, to $292 in after-hours trading. During the regular session Wednesday the stock rose $199.53, or 135%, to $347.51.

The surge in Gamestop has inspired outsized gains in other heavily shorted companies in recent days, including AMC Entertainment  (AMC) - Get AMC Entertainment Holdings Inc. Class A Report and Bed Bath and Beyond  (BBBY) - Get Bed Bath & Beyond Inc. Report.

On Wednesday, online broker TD Ameritrade said it had restricted some transactions in GameStop and AMC and other stocks to "[mitigate] risk for our company and clients."

Other online brokerages reported disruptions in trading of heavily shorted stocks Wednesday as well.

The Securities and Exchange Commission also issued a statement Wednesday saying it is "monitoring the on-going market volatility in the options and equities markets and, consistent with our mission to protect investors and maintain fair, orderly, and efficient markets, we are working with our fellow regulators to assess the situation and review the activities of regulated entities, financial intermediaries, and other market participants."