It resumed its upward momentum, rising 75 percent from the beginning of the session after slumping when trading platforms imposed buying halts on viral stocks.

GameStop shares doubled in early deals on Friday after slumping a day before when several online platforms imposed buying halts, on January 29, 2021.
GameStop shares doubled in early deals on Friday after slumping a day before when several online platforms imposed buying halts, on January 29, 2021. (AFP)

The army of small investors behind this week's dramatic squeeze on Wall Street hedge funds have returned to drive shares in GameStop and other hot companies higher as online broker Robinhood eased disputed trading restrictions.

GameStop shot up 75 percent, clawing back much of its steep loss from the day before, after slumping the day before when several online platforms imposed buying halts, sparking a backlash from investors, celebrities and policymakers.

Robinhood buckled to pressure and said it will allow customers to start buying some of the stock again. 

The trading app said on its website that it was easing the restrictions, but still not allowing purchases of fractional shares in GameStop and 12 other companies, effectively meaning smaller investors have to bet more in order to buy in further to the trade.

The website also showed the brokerage, which has said its hand has been forced by the surge in market volatility, was maintaining numerical limits on the number of shares any one account could hold in each of the companies, further hampering players with existing positions from betting on more gains.

GameStop has been on a stupefying 1,600 percent run over the last three weeks and has become the battleground where swarms of smaller investors see themselves making an epic stand against the 1 percent.

The assault is directed squarely at hedge funds and other Wall Street titans that had bet the struggling video game retailer’s stock would fall. Those firms are taking sharp losses, and other investors say that's pushing them to sell other stocks they own to raise cash. That, in turn, helps pull down parts of the market completely unrelated to the revolt underway by the cadre of smaller and novice investors.

READ MORE: The GameStop, Reddit and Robinhood saga, simplified

Trading volatility

The showdown between small-time traders and professional short-sellers has drawn the scrutiny of Congressional lawmakers, the White House, the US Securities and Exchange Commission (SEC) and is being probed by both the New York and Texas Attorneys General.

Global equity markets have also suffered as funds were forced to sell some of their best-performing stocks, including Apple Inc, to cover billions of dollars of losses.

Robinhood has been one of the hottest venues in the retail-trading frenzy but its sudden curbs on buying set off a raft of online protests as the firm tapped credit lines to ensure it could continue trading.

The brokerage also said it had raised more than $1 billion from its existing investors, having been strained by the high volumes and volatility of trading this week.

The SEC said its regulators were keeping an eye on the whipsawing share prices of some Wall Street stocks that had been targeted by a social media-driven campaign to make wealthy hedge funds suffer.

"The commission is closely monitoring and evaluating the extreme price volatility of certain stocks' trading prices over the past several days," the SEC said in a statement.

"We will act to protect retail investors when the facts demonstrate abusive or manipulative trading activity that is prohibited by the federal securities laws."

READ MORE: Facebook suspends Robinhood group amid GameStop boom

Reddit anger

On Reddit forum WallStreetBets, which with almost 6 million members is seen as having fuelled the rallies, GameStop and AMC remained overwhelmingly favoured stocks.

JP Morgan has named 45 stocks that may be susceptible to similar "fragility events" in days to come, including real estate company Macerich Co, restaurant chain Cheesecake Factory Inc and clothing subscription service Stitch Fix Inc.

Like GameStop, AMC and American Airlines Group Inc, all have high "short" interest ratios, making them subject to a squeeze on funds that have bet on the shares falling.

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Source: TRTWorld and agencies