Streets fight gets ugly on GameStop

A slugfest between Wall Street and Main Street took an unexpected turn after moderators of a stock trading forum that has helped fuel massive rallies in the shares of GameStop temporarily closed its doors.

Shares of GameStop and other firms tumbled in extended trading after Wallstreetbets, a discussion forum popular with retail traders on the Reddit website, briefly turned invitation-only. They pared losses an hour later, when the forum opened back up.

"We have grown to the kind of size we only dreamed of in the time it takes to get a bad night's sleep," read a message from the group's moderators after Wallstreetbets reopened.

"We've got so many comments and submissions that we can't possibly even read them all, let alone act on them as moderators."

Shares of GameStop, AMC Entertainment, Koss Corp and BlackBerry all fell at least 20 percent moments after the shuttering of the forum, highlighting the role it has played in fueling stock rallies that many say have been driven primarily by retail investors.

Earlier in the day, amateur traders chalked one up versus Wall Street as hedge funds suffered heavy losses on short positions in GameStop, and regulators and financial professionals called for more scrutiny of trading fueled by anonymous social media posts.

In the latest skirmish in the week-long battle, funds sold long positions in stocks to pay for losses shorting GameStop, contributing to a slide of more than 2 percent in Wall Street's main indexes.

The market turmoil caught the attention of the White House, with press secretary Jen Psaki saying President Joe Biden's economic team - including Treasury Secretary Janet Yellen - was monitoring the situation.

Massachusetts state regulator William Galvin called on NYSE to suspend GameStop for a 30-day cooling-off. "This isn't investing, this is gambling," he said.

The US Securities and Exchange Commission said it was aware of the market volatility and working with fellow regulators to assess the situation.

Senator Elizabeth Warren, long critical of Wall Street, called on regulators to take action.

The war began when famed short seller Andrew Left of Citron Capital bet against GameStop and was met with a barrage of retail traders betting the other way. Citron has been a target on Wallstreetbets.

Left said in a video post that Citron abandoned its bet against GameStop after the video game retailer's value soared almost tenfold in a fortnight.

Melvin Capital Management closed out its short position on Tuesday after taking a huge loss.

Shares of GameStop surged 135 percent during Wednesday's trading session, bringing their gain since January 12 to about 1,700 percent and ballooning its market capitalization to US$24 billion.

US shares of BlackBerry jumped 33 percent, bringing their gain in 2021 to 279 percent, while movie theater operator AMC surged 300 percent and is now up more than 800 percent this year.

Reuters

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