The GameStop (GME) share price nearly hit $ 500 per share on Thursday, after a week of dizzying growth driven by users of the WallStreetBets community on Reddit and backed by other retail traders. These "day traders" forced a GME short-seller to close his position and accept a loss of billions of dollars, suggesting that Wall Street does not have a monopoly on controlling the stock market.
GameStop actions in the spotlight
On Thursday, Robinhood and other retail trading platforms suspended GameStop purchases, as did AMC and other actions pumped by WallStreetBets in the past few days. The question now is how the US government will react.
As of Thursday afternoon, several members of the government were planning new hearings to discuss the situation. Both the House Financial Services Commission and the Senate Banking Commission announced that there would be hearings regarding short-selling and online trading platforms, although no specific dates were announced.
Representative Maxine Waters (Calif.), Speaker of the House Committee, said in a statement that hedge funds "have a long history of predatory behavior" which he called indefensible.
“As a first step to curb these abusive practices, I will be convening a hearing to review recent activity around GameStop stocks and other affected stocks with a focus on short selling, online trading platforms such as Bitcoin Pro, gamification and their systemic impact on our capital market and retail investors, ”he said.
Regulatory response to the GameStop case
Financial regulators may be less equipped to respond to trading or suspensions. Fox Business reporter Charles Gasparino reported that the SEC is planning to investigate whether Reddit commentators manipulated the stock market by pumping GameStop and other company stock prices.
However, it is unclear what these regulators could actually do. An attorney with experience in the securities markets, who requested anonymity due to the lack of clarity on the matter, said the SEC doesn't have much leeway in this situation.
“What will they do? Preventing people from having chats on a social media site? This isn't even a pump and dump, because a pump and dump is a centralized effort by a handful of parties to move a stock, ”the lawyer said.
"This is an effort of a whole community, of hundreds of people or maybe thousands of people who are investing a couple of dollars here and there, and it works." White House Press Secretary Jen Psaki told reporters about a SEC statement on monitoring the situation on Thursday during a press conference.
Asked if President Joe Biden or the administration were reviewing Robinhood's actions, Psaki said, "He is frequently briefed by his business team and I have nothing more to add ... I have nothing more to say about that."
