The trading frenzy over
which has roped in everyone from hedge funds to Gen-Z meme traders, continued on Friday.
Shares in the videogame retailer are soaring in premarket trading—they were up 71% at the time of this writing—with other heavily-shorted favorites like
What’s behind the move? After halting much of the action in GameStop on Thursday, trading app Robinhood said it would allow limited trading again.
There are also tens of thousands of call options that expire today with a strike price that could reasonably be reached if volatile trading continues. That would force market makers to deliver the shares—and crank up the volatility. It’s gotten so wild, that the moves have started to shake up the broader equity markets.
Don’t panic. It’s true that stock market indexes may fall as hedge funds sell their big long bets to cover the failed shorts. But the market is so much bigger than GameStop, AMC, or BlackBerry.
Ultimately, it will be things like inflation, economic growth, central bank support that will determine whether the market rises or falls.
Remember, macro matters more than memes.
*** Want more market news from Barron’s? Every weekday we highlight the consequential market news of the day and explain what’s likely to matter tomorrow in our Review & Preview newsletter. Sign up here.
Robinhood Raises Money Amid Demands to Meet Funding Requirements
After Robinhood and other brokerages restricted trading around GameStop stock and other soaring equities popular among retail traders, investors and lawmakers are looking for answers.
- Robinhood has reportedly raised $1 billion of additional funding from investors, according to reports from Bloomberg and The New York Times. It also drew down several hundred millions of dollars from credit lines, according to the reports.
- In interviews on Bloomberg TV and CNBC, Robinhood CEO Vladimir Tenev pointed to financial requirements, including Securities and Exchange Commission net capital obligations and clearinghouse deposits, as reasons for restricted trading and raising more cash. The company said the decision was not at the direction of market makers Robinhood routes trades to.
Read More: The GameStop Frenzy Won’t Die. What It Means for the Stock Market.