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The “Reddit rally” continued full steam ahead on Wednesday as officials began to question whether they were facing a populist market insurgency or something more sinister.
GameStop Shares and AMC Entertainment posted daytime gains of 134% and 301% respectively – just the latest in what has been described on Reddit bulletin boards as a ‘war’ between novice investors against elites. of Wall Street who sell stocks to profit from the potential share declines.
“I want to help with this movement and I will hold the line!” one user recently wrote about his investment in video retailer GameStop.
But when asked about the dizzying heights reached by actions like GameStop, Nasdaq chief Adena Friedman raised the possibility of a criminal act.
Speaking on CNBC, Freidman said regulators need to consider whether the “social media activity” behind the recent stock market spikes could be a form of market manipulation known as the pump and dump system.
TD Ameritrade has also reported difficulty announcing new restrictions on trading in popular stocks such as GameStop and AMC. The retail brokerage said it had added the trading limits “in the interest of mitigating risk to our business and our clients.”
White House press secretary Jen Psaki also rang the bell, saying “Secretary Yellen and others are monitoring the situation” while Federal Reserve Chairman Jerome Powell found himself dodging a question about GameStop at its press conference after the Federal Open Market Committee meeting.
GameStop shares have jumped more than 700% in recent weeks, pushing its market capitalization from around $ 1 billion to $ 24 billion on Wednesday.
The rally was fueled by anonymous posters spewing populist rage against the Wall Street machine, which has tried and failed to bet against GameStop and other actions.
Despite the concerns, the pros on Wall Street seem to believe they were simply beaten by the masses. This includes Andrew Left of Citron Research, whose January 21 video predicting GameStop shares to fall to $ 20 a share prompted Reddit posters to double, leading to a zealous squeeze on the stock.
“It’s not a ‘pump and dump’ except a lot of people buying and buying,” Left told The Post on Wednesday. “These are flashmobs that do not respect the market and have made trading the lowest form of gambling.”
Left, who reported threats against himself and his family to the FBI, said he abandoned his failed effort to bypass stocks. Hedge fund Melvin Capital also reportedly closed its short position on GameStop after suffering a huge loss.
Other hurdles say they agree with Left. “More power for the WallStreetBets crowd,” sighed Thomas Thornton of Hedge Fund Telemetry. “They figured out how to play with the system, how to beat the shorts and they won. Congratulations to them. “
“It’s not fraud, it’s not market manipulation, it’s not illegal,” said Francis Curran, securities litigation lawyer at Kudman Trachten Aloe & Posner. “These are not boiler rooms that call people cold. It’s a spontaneous online revolution and the other side of these trades seems very unhappy about it. “
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