Robinhood Restricted-List Shares Like AMC and Koss Are Up

Robinhood’s restricted-trading stocks surged on Friday on pre-market trading, after the online brokerage said it would resume limited trading in heavily short names.

GameStop jumped 96%, while Koss rose 93%. AMC Entertainment and Express grew by 53% and 44% respectively. Naked Brand Group gained 37%.

For some stocks, Friday’s pre-market spike erased heavy losses from the previous session after Robinhood and other retail brokers announced restrictions on a handful of stocks, including in some cases, do not allow clients to buy new stocks and sell only. GameStop, for example, slipped 44% on Thursday.

In a statement Thursday night announcing that he would resume trading in blacklisted stocks, Robinhood said: “We will continue to monitor the situation and we may be able to make adjustments if necessary.” The start-up added that its earlier decision to restrict trading – which angered many users – was necessary to comply with the capital requirements imposed by the SEC for brokers.

Interactive Brokers have taken similar actions to Robinhood, both of which are also increasing margin requirements on certain securities. It is not unusual to increase the margin requirements, but the decision to restrict trading was more extreme, which irritated and confused some users.

The move follows a massive influx of retail investors into some of the market’s shortest stocks, forcing hedge funds and those on the other side to rush to cover their losses. This, in turn, drives up stock prices even more. Investors took to popular forums like Reddit’s WallStreetBets chart to discuss their trades.

Short selling is a strategy in which investors borrow shares of a stock at a certain price in the hope that the market value will fall below that level when it is time to pay for the borrowed stock.

Two of the three busiest days since at least 2007 came this week as the trading frenzy continued, prompting a number of lawmakers to question whether regulators should take action.

Retail investment has skyrocketed amid the pandemic and on Friday Robinhood raised more than $ 1 billion and tapped lines of credit to ensure it had the capital to offer deals in the names volatile.

“By leveraging our lines of credit, which we do all the time as part of normal day-to-day operations, we get more capital than we can deposit with clearing houses and this will allow us to ideally allow more investment. with fewer restrictions, ”Robinhood CEO Vlad Tenev told CNBC’s Andrew Ross Sorkin on Thursday evening.

AMC is also reportedly looking to raise additional capital amid increases of more than 300% in its shares this year, according to Reuters, citing sources. On Monday, AMC said that since Dec. 14, it has raised $ 917 million in new equity and debt.