Despite the deep political divide in the United States, there are still some things that can unite both Democrats and Republicans.
Sen. Ted Cruz, R-T.X., and Rep. Alexandria Ocasio-Cortez, D-N.Y., both vowed to take the side of the little guys as small investors rallied to take on giant Wall Street institutions this week.
Their message of unity comes after Robinhood and other online trading platforms suddenly restricted trading in GameStop, AMC Entertainment, and other top-performing stocks that have soared recently due to rabid buying by smaller investors.
GameStop stock has rocketed from below $20 earlier this month to more than $400 early Thursday as a volunteer army of investors on social media challenged billion dollar Wall Street institutions who had placed huge bets that the stock would fall.
The stock fell, however, to around $240 after sliding more than 30% in midday trading after trading applications sided with big investors and cut off most of the public from trading the stock.
The controversial move to restrict small, or retail, investors from trading — but allowing billion-dollar hedge funds to continue trading — united the two political figures.
Cruz and Ocasio-Cortez have both vowed to investigate Robinhood’s decision to cut off small investors.
Fully agree. 👇 https://t.co/rW38zfLYGh
— Ted Cruz (@tedcruz) January 28, 2021
Robinhood said Thursday small investors would only be able to sell their positions and not open new ones in some cases, and Robinhood will try to slow the amount of trading using borrowed money.
Besides GameStop, Robinhood also blocked trading in stocks such as AMC Entertainment, Bed Bath & Beyond, Blackberry, Nokia, Express Inc., Koss Corp., American Airlines, Tootsie Roll, Trivago, and Naked Brand Group.
Interactive Brokers also placed option trading of AMC, BlackBerry, Express, GameStop, and Koss “into liquidation,” citing extraordinary volatility in the markets. It also tightened margin requirements indefinitely on “short stock positions.”
“We do not believe this situation will subside until the exchanges and regulators halt or put certain symbols into liquidation only,” the company tweeted.
The measures follow similar trading restrictions on Wednesday by Schwab and TD Ameritrade.
Some multibillion-dollar Wall Street institutions such as Citron Research and Melvin Capital had placed bets that GameStop shares would fall as the company tries to transform itself from a brick and mortar retailer to a seller of online video games.
But smaller investors saw an opportunity and rallied to the stock. By sending the stock price soaring higher, they triggered multiple “short squeezes.”
By driving up the price, these small investors forced the billionaire hedge funds to cover their risky bets by buying the stock back, increasing the stock price even further.
One of Melvin Capital’s biggest investors, Citadel, is also one of Robinhood’s biggest customers.
More people need to understand what’s happening! Via @Ehukai411 pic.twitter.com/5cOMZhHP6f
— Natalie Brunell ⚡️ (@natbrunell) January 28, 2021
Prior to shutting down their customer’s access to trades, Robinhood’s stated goal was to “democratize” investing and to bring more regular people into investing.
READ MORE: Small investors battle big money
The Associated Press contributed to this article