People have been attempting a short squeeze all week. Short squeezes are illegal. By allowing a short squeeze to continue with no action, Robinhood would have been taking on massive legal liability for aiding and abetting illegal activity.
Shorts got greedy and got caught out. Should short sellers not have any downside to their trades?
I guess the billion dollar question is, legally: does buying stocks in anticipation of a short squeeze, and communicating the same to others, count as manipulation?
The question I think would rotate around whether this is 'a scheme to manipulate', or simply identifying an opportunity to capitalise on Melvin's greedy position.
Oh please. As if whoever has their thumb on the social media scale isn't greedy. Greed runs the street in longs and shorts. You can invest modestly by diversifying and avoid all that.
> Although some short squeezes may occur naturally in the market, a scheme to manipulate the price or availability of stock in order to cause a short squeeze is illegal.
Also, can you use Clojure to cause a short squeeze, or... [ducks]
Also: If a big hedge fund shorts a stock, expecting to drive its price down, that's cool. (Search "big short drives down stock price")
But if regular people buy a stock expecting to drive its price up, that's terrible.
Sorry, this position just isn't credible.
I don't know if it is or should be illegal but I can see why it raises some questions.
No, you're betting on the stock's future performance, not the company's future performance. There's an ocean of difference between the two.
If the company does poorly, but the stock price rises, or stays the same (Say, because we're in the middle of a COVID recession, and the printing presses are working overtime), you're going to lose a lot of money.
How do you know that everyone who bought it actually doesn't care about Gamestop's worth? There isn't really any way to prove that every single person (or even a majority of people, or really even a good portion of the people) don't care about GameStop's success and are solely doing it as a metagame.
Sure, there's threads on WSB about this, but there's no real way to tie that to actual transactions, and not everyone who has bought stock even contributes to that subreddit, let alone the specific threads about this.
Furthermore, all it really takes is someone saying "I bought stock because I believe in the company". We don't have thought police; unless someone explicitly posts "I, RH account XXX, bought the stock in a concerted effort to short it" there's no real way to prove intent.
I heard (from a non-authoritative source) that the coordination on reddit, etc. is not manipulation.
Please source the following comment:
> by continuing to allow trades, Robinhood was taking on major legal risks
There is no one else sharing this talking point that I can see.
I will continue to call you a shill. Please see my comment history to understand that this user is quite interested in spreading misinformation, and given their previous topics, looks to be being compensated for doing so.
Obviously not the reason, since they posted a blog saying they did it to protect consumers from volatile stock.
It says market manipulation is illegal. It is not particularly clear whether a message board getting excited about a short squeeze does not count as something that "may occur naturally".