GameStop Rebounds After Robinhood Lifts Buying Restrictions

GameStop Corp. GME shares jumped Friday after Robinhood completely lifted restrictions on buying shares of so-called meme stocks, including GameStop and AMC Entertainment Holdings Inc AMC.

What Happened: GameStop shares have skyrocketed from under $20 to as high as $483 in recent weeks as online communities of retail traders, led by Reddit’s WallStreetBets, orchestrated a buying frenzy in an attempt to trigger short squeezes in some of the most heavily shorted stocks in the market.

Related Link: Koss Family Cashes Out Amid Reddit-Fueled Short Squeeze

The short squeeze in GameStop triggered heavy January losses among hedge fund short sellers and ultimately resulted in Robinhood making the controversial decision to temporarily ban and restrict buying in GameStop and other popular meme stocks in recent days.

Why It’s Important: Robinhood, which was preparing to go public in the near future, is now facing a reported 30 lawsuits pertaining to its shutdown of GameStop trading.

While the outcome of the lawsuits is uncertain, the shutdown certainly seemed to work in ending the short squeeze.

After topping out at $483 on Jan. 28, GameStop shares dropped all the way back under $50 on Friday before bouncing to around $70 in morning trading.

Despite the cooldown, members of the WallStreetBets community remained positive on Friday that the stock is still headed “to the moon.”

“Now is the time to strike back,” one poster wrote. “If people with buying power who like the stock buy more and more, we can put unparalleled pressure on [hedge fund Melvin Capital] and the shorts once again, the price will rocket a lot sooner.”

Near-term volatility is likely to continue in GameStop for the time being, but BofA Securities analyst Curtis Nagle said Thursday that long-term investors shouldn’t lose sight of just how bad the company’s underlying business fundamentals are.

“While shares do not appear to be trading on fundamentals (which are very challenged) they should in time, and many of the turnaround opps touted by bulls may not materialize,” the analyst said in a note. 

BofA has an Underperform rating and $10 price target for GameStop.

Here’s how several popular WallStreetBets meme stocks were trading at last check Friday. 

GameStop was up 21.25% at $64.66. 

AMC was up 1.13% at $7.17. 

BlackBerry Ltd BB was up 6.73 at $13%.

Nokia Oyj NOK was down 2.17% at $4.28. 

Koss Corporation KOSS was up 4.82% at $19.71. 

Naked Brand Group Ltd NAKD was down 3.32% at $1.13. 

Benzinga’s Take: Many younger and newer retail traders may not have experienced it before WallStreetBets, but pump-and-dump schemes have been around on Wall Street for decades.

The early pump-and-dump investors and the opportunistic company insiders are always the ones who make the big money, and the later investors are the ones that lose it.

Photo by Keith C via Wikimedia.