GameStop shares soared again in pre-market trading after Robinhood lifted its restrictions to allow customer to purchase securities.
Robinhood, a cheap trading platform which attracted millions of millennials to trade by making stock trading easy and removing trading fees, previously restricted buying of the kinds of securities that have sparked an enormous rally in shares of GameStop and AMC Entertainment Holdings.
“Starting tomorrow, we plan to allow limited buys of these securities,” said the app’s representative.
“We’ll continue to monitor the situation and may make adjustments as needed.”
The company also started selling its users’ stock without their permission after market volatility put the White House on alert on Thursday.
Robinhood CEO Vlad Tenev defended the company’s decision, as protesters gathered on Wall Street to vent their fury.
“We had to make a very difficult decision. It’s been a challenging day,” Tenev said in an interview.
“We’re committed to helping our customers navigate this uncertainty,” the company said in a statement.
“We fundamentally believe that everyone should have access to financial markets.”
One of their customers filed a class-action lawsuit at the Southern District of New York on Thursday, citing that Robinhood’s actions rigged the market against its customers.
“Robinhood’s actions were done purposefully and knowingly to manipulate the market for the benefit of people and financial institutions who were not Robinhood’s customers,” the lawsuit states.
The lawsuit also claims that the decision deprived retail investors of potential gains they could have made by buying when the stock was low and selling when its price rose.
GameStop’s stock soared more than 1000% over the past several weeks after Reddit’s WallStreetBets group began promoting the stock.
This caused short-sellers to buy shares to hedge their positions, sending the stock soaring even higher.
However, the company does not support such elevated stock prices, as it may wipe out traders who had placed big bets on GameStop after the bubble had burst.
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