Online trading app Robinhood has imposed trading limits on 50 stocks, including GameStop (GME) - Get GameStop Corp. Class A Report, amid ongoing volatility in stocks touted in social media chatrooms including the WallStreetBets subreddit.
The move expands on a list of 13 stocks Robinhood limited Thursday. That move, along with limits imposed by online brokerages, sparked an outcry among social media groups and elected officials alleging a Wall Street effort to protect itself against newly empowered populist investors.
Robinhood has said it had to limit trading in the stocks because of huge costs associated with settling the massive number of trades.
The company has received a private equity infusion of $1 billion and drawn down a $500 million credit line to help cover its needs, Bloomberg reported.
Shares of GameStop soared in January as small investors targeted the heavily shorted stock to create a short-squeeze. The concerted action helped force shares as high as $482 this week.
The Reddit effect has expanded to other heavily shorted stocks as well, including Bed Bath & Beyond (BBBY) - Get Bed Bath & Beyond Inc. Report, American Airlines (AAL) - Get American Airlines Group, Inc. Report, Kohl’s (KSS) - Get Kohl's Corporation Report and others. Alternative investments including silver and the Dodgecoin cryptocurrency have also seen surges.
Robinhood said account holders can only open new positions of 1 share in the 50 stocks it has imposed limits on. It also limited the number of options contracts that can be bought.
Shares of GameStop rallied 70% Friday, on an otherwise down day for markets that saw the Dow Industrials lose 620 points. In after-hours action, the stock edged lower, falling $8, or 2.5%, to $317.00