This week has been very hot for investors and the tech stock market in general. First of all, we are talking about the situation around the offline game store GameStop and, to a lesser extent, BlackBerry, Nokia and the AMC cinema chain. But there are many more parties involved in the story. AMD is unexpectedly on the list of victims.
The fact is, Wall Street hedge funds have been bulling GameStop for a long time, hoping to eventually end the company to make billions. But the Reddit community WallStreetBets decided to start a riot by buying back GameStop shares (options) – and this led to a sharp rise in the company’s stock price. For comparison: if in mid-2020 GameStop shares were listed on the stock exchange for less than $ 10, now they are trading at about $ 325. Needless to say, small traders made good money on this, and hedge funds suffered colossal losses.
The story was further developed by the online broker Robinhood, popular with private investors, which announced that it would close operations in hype securities, including shares of various companies – just those on which members of the WallStreetBets community were playing against hedge funds. But Robinhood believes it is taking steps to protect its clients from significant market volatility, although most people who have dealt with particular volatile stocks likely knew exactly what they were doing.
A trade blockade by Robihhood saw shares in GameStop and AMC plunge 21% and 50%, respectively, on Thursday, before recovering partially on Friday. Surprisingly, AMD is one of the companies that got caught up in this story. It would seem that it is not connected with the scandal around GameStop (except for the production of chips for game consoles), but it also made it to the Robinhood list, which restricts stock transactions.
On Thursday and Friday, Robinhood prohibited investors from buying more than one share of AMD at a time. As you might expect, this turn of events caused an immediate protest from the users of the service. Indeed, unlike GameStop or many other companies whose shareholders have volunteered to protect Robinhood, AMD has a solid financial footing.
At the end of 2020, AMD’s revenue grew 45% year-on-year, and annual profit increased 52% to $ 4.35 billion.All key AMD divisions showed growth: from Ryzen processors and Radeon video cards to chips for consoles and processors. EPYC for Data Center. Despite big gains, AMD shares plummeted after the release of the report on Thursday, after which Robinhood emerged with its ban.
Some believe that this is clearly a manipulation of AMD stock. By limiting buying, Robinhood creates artificial pressure from sellers, which can further reduce the price of securities. In the past month, the number of bets on the fall in AMD stock really increased, so Robinhood’s actions are playing into the hands of those who made such bets. The WallStreetBets community is believed to be gearing up to push AMD stock, and Robinhood doesn’t want to be caught off guard again, as with GameStop. However, these restrictions only increase the distrust of the service on the part of users and arouse the close attention of regulators, including the US Securities Commission (SEC), which most trading companies try to avoid at all costs.
While Robinhood’s actions are legitimate, they go against the intentions of small traders, who are focused on fighting the leading Wall Street hedge funds and helping companies in trouble (at the same time, such traders, of course, want to make money). Robinhood has proven to be popular for its ease of use and general availability for all people. But it doesn’t seem to live up to its name in honor of the famous robber who stole from the rich to give to the poor.
By the way, someone at WallStreetBets is clearly using the money from the fight against hedge funds to counter-advertise Robinhood:
Flown Over Robinhood HQ from r / wallstreetbets
At this point, it looks like Robinhood has already removed AMD from the list of companies subject to restrictions on stock trading. But everything can happen again. In any case, the damage to the reputation of Robinhood has already been done, and in the future, the SEC may catch up.
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