GameStop Corp on Thursday plummeted, snapping a dizzying six-day rally and wiping out nearly US$11 billion in market value after brokers choked off demand for the stock by curbing trading on the apps used by the firm’s zealous fan base.
On Thursday, the stock plunged 44 percent after Robinhood Markets, Interactive Brokers Group Inc and others took steps to curtail activity in several high-flying stocks, including GameStop and AMC Entertainment Holdings Inc.
E*Trade Financial Corp is preventing customers from purchasing shares of both firms, a person familiar with the matter said.
GameStop shares on Thursday jumped during extended trading, after Robinhood said that it would allow limited buying of certain securities yesterday.
“We’re beginning to open up trading for some of these securities in a responsible manner,” the firm said in a statement.
GameStop rose 46 percent in post-market trading, while AMC climbed 29 percent.
The video game retailer triggered 19 volatility halts on its way to shedding more than twice what it was worth on Monday.
Volume also fell, with about 55 million shares traded by Thursday afternoon, a far cry from its record of 197 million on Friday last week.
The trading curbs resulted in howls of outrage on Reddit’s WallStreetBets forum, which has been the launching point for many of this week’s blistering rallies.
Robinhood has been hit by lawsuits from customers.
It also prompted lawmakers to criticize restrictions imposed on retail investors.
US Senator Sherrod Brown, incoming chairman of the US Senate Banking Committee, said that he plans to hold a hearing on the “current state of the stock market.”
The clampdown by brokerages extended beyond GameStop to other popular stocks, such as BlackBerry Ltd, that have surged this week, burning short sellers and hedge funds.
The phenomenon attracted the attention of regulators on Wednesday, with the US Securities and Exchange Commission saying that it was monitoring the situation.
“The inability to trade depressed the volume, and high volume is what kept the stock trading at a high level,” Wedbush Securities Inc analyst Michael Pachter said. “I’m actually surprised the trading platforms think they can manage the market this way, and expect they will reverse their decision shortly.”
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