An oil company producing the equivalent of 70 barrels of oil daily surged in value almost 1,000 percent to $128 million thanks to a surge in trading activity coming from retail traders.
The traders, organized in the WallStreetBets forum on Reddit, took on hedge funds earlier this month and won by, as some of the group say, beating them at their own game of shorting.
What will probably remain in history as the GameStop squeeze happened earlier this week when the WallStreetBets Redditors started buying as much of the company’s stock as they could. Why? To hit back at hedge funds that had opened huge short positions on the company. As a result of the massive retail buying, GameStop’s stock surged from less than $150 per share on January 26 to almost $350 the next day. Hedge funds blinked, as the AP put it, and started closing their positions, incurring heavy losses.
Now it seems the WallStreetBets traders are going other places, too, and they are not even places with huge short positions: Bloomberg reports that short interest in New Concept Energy, a Texas-based driller, whose operations are concentrated in the Appalachian Basin and Utica, stood at 13 percent of its float earlier this month. Yet short positions have fallen even further after the intervention of the traders: short interest in the company now stands at just 0.3 percent.
Meanwhile, trading platforms have restricted trade in response to the wild stock swings the Reddit group also caused in AMC’s stock and Bed, Baths & Beyond. This naturally led to a backlash: Robinhood users have filed a class-action suit against the trading platform for restricting their trade in GameStop and other shares.
Other trading platforms are also restricting trading activity due to the excessive volatility caused by the deliberate stock-buying in the last couple of days.