An SEC review says the mania for GameStop and other downtrodden stocks early in the year shows how much market power is being wielded by a new generation of novice investors armed with apps on their phones.
Many of the points in the report were already known, such as how the extremely heavy bets made by some hedge funds against GameStop’s stock actually helped accelerate its extreme ascent, though they weren’t the main driver.
The report also indicated the SEC could further scrutinize events that may cause a brokerage to restrict trading in a stock. During the height of the frenzy, several brokerages barred customers from buying GameStop after the clearinghouse that settles their trades demanded more cash to cover the increased risk created by its highly volatile price. That left many investors incensed.
And, perhaps in a disappointment to some of the investors who piled into GameStop to punish the financial elite: The SEC’s staff said it doesn’t believe hedge funds were broadly affected by investments in GameStop and other meme stocks.During the run-up of GameStop’s price, many people were bellowing on Reddit and other social media platforms that this was their chance to stick it to the hedge funds.
Some of those short sellers were indeed burned. And when they bought GameStop shares to get out of their suddenly soured bets, the buying helped push the stock up even further. But other hedge funds that had earlier bet on gains for GameStop’s stock made profits, as did others who jumped into the upsurge.
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