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Prevented from Buying Certain Stocks?


If you’ve been prevented from buying GameStop, AMC, or other stocks by your brokerage company, call us for a free consultation.

 

About the Claim

A number of large financial institutions that facilitate the trade of US stocks also have also halted trading on GameStop, AMC, and a number of other companies, allegedly for the sake of their customers’ protection. That they care about their customers’ protection is surprising, considering that for time immemorial they have allowed retail investors to lose untold sums to firms whose market power allows them to covertly manipulate stock prices.

They claim that the prices are artificially skyrocketing because of retail investors on Reddit, who were very open and transparent about their moves and the reasoning behind them. The reasoning was simply that the large hedge funds, in copying each other’s moves, had made a huge mistake.

The message that comes out of all of this is clear, the free market is only free while the retail investor is losing, and when the large firms are called out for their bad bets, it’s time to shut the game down.

If you’ve been prevented from buying GameStop, AMC, or other stocks by your brokerage company, call us for a free consultation.

Read the full story on Wired.com

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GameStop was one of many retail businesses that have been hit by the COVID-19 pandemic, aggravated by short selling by a number of large hedge funds. Short selling is the practice of selling a stock that you don’t have, paying interest on it, and buying the stock later, hopefully at a lower price. Sometimes it is used as a predatory tactic to bankrupt a company on its last legs.

Last December, GameStop missed their quarterly revenue target and large hedge funds began to feel validated in their decision to short sell the company’s stock. These funds began to copy each other’s trade, and before long, there were more short-sold stocks than there were even stocks to be sold.

On the internet forum Reddit, commentators began to notice the ridiculousness of the situation and encouraged other users to buy and hold the stock, knowing that this would skyrocket prices because the short sold firms would have to continue to pay interest on their positions until they could buy back the shares that they were short on.

Some firms, like Citron Research, who were heavily short sold on GameStop, in a clear move to manipulate prices, tweeted on January 19 that the individual buyers were “suckers at this poker game”, that the stock would be “back to $20” fast, and subsequently delayed their report on the stock, which was had been due to be released on the next day.

Other firms, like Melvin Capital, who had short sold Tesla for years and whose founder bragged about it publicly, once again gloated at the prospect of profiting from the downfall of another business. Instead, as more and more people caught onto the vulnerable position of these large funds, the price of GameStop (and a number of other companies’ stocks) began to skyrocket in what is known as a “short squeeze”.

In response, a number of brokerages began to halt purchases of GameStop and other “targeted” stocks. Notably, retail trading platform Robinhood not only prevented purchases of certain stocks, but warned its users to sell their GameStop stocks, before forcefully selling their customers’ shares in the company to “mitigate their risk”.

Robinhood happens to use Citadel to handle their order flow. Meanwhile, Citadel contributed to a $2.75 billion bailout for Melvin Capital. Citadel itself reloaded their short sold positions before they instructed Robinhood to stop the purchases of GameStop shares. This is a blatant move to manipulate prices, for which, in a just society, the heads of these companies would serve jail time.

On our side of the border, a number of large financial institutions that facilitate the trade of US stocks also have also halted trading on GameStop and a number of other companies, allegedly for the sake of their customers’ protection. That they care about their customers’ protection is surprising, considering that for time immemorial they have allowed retail investors to lose untold sums to firms whose market power allows them to covertly manipulate stock prices.

Retail investors on Reddit were very open and transparent about their moves and the reasoning behind them. The reasoning was simply that the large hedge funds, in copying each other’s moves, had made a huge mistake. The message that comes out of all of this is clear, the free market is only free while the retail investor is losing, and when the large firms are called out for their bad bets, it’s time to shut the game down.

If you’ve been prevented from buying GameStop, AMC, or other stocks by your brokerage company, call us for a free consultation.

 


 

 

 

 

 

 

 

 

 

 

 

 

Did You Know?

If you have not filed your Canadian tax returns, or if you have filed them and CRA believes that you have not reported all of your income, they may issue a new worth assessment. They take two financial snapshots, one at the start of the audit period and one at the end.

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