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By Davide Scigliuzzo and Katherine Doherty, Bloomberg
1 Feb 2021 07:31
Image: Tiffany Hagler-Geard/Bloomberg
Itâs the kind of rescue that the most indebted companies in America can only dream of: a fresh injection of cash that doesnât hurt their already depressed stock price or load even more costly debt onto their balance sheet.
Yet thanks to the army of day traders who use Reddit to tout and bid up out-of-favour stocks and squeeze short sellers, firms such as American Airlines Group Inc. and AMC Entertainment Holdings have found themselves on the receiving end of just such a lifeline.
Vlad Tenev is likely to be made to explain his company s actions last week
The brokerage put limits on peoples trading and sold some customers shares
That led to accusations it was in the tank for hedge funds that had bet against GameStop after their shares rose more than 1,600 percent
Maxine Waters, the California Democrat who is the powerful head of the House Financial Services Committee, is likely to call Tenev on February 18
It comes as the leader of the Reddit army that poured into GameStop is said to have lost $5 million on his bet today as shares in the retailer dropped 31%
Robinhood had already been forced to raise $1 billion from shareholders
And it had restricted the purchase of 50 stocks Friday; down to 8 Monday
That came after clearing house NSCC demanded a $3 billion security deposit
Last week s wild trading was driven by small investors on the message board Reddit, who took on hedge funds that had bet against shares of GameStop
Small-time investors had driven a 1,600% rally in the shares of the game retailer
By closing bell Monday the market saw Gamestop s shares down nearly 31%
Now silver has become the latest example of the influence wielded by followers of WallStreetBets going up against big-time investors
The Reddit Army Bailout: Desperate Companies Get New Lifelines
Bloomberg 1/31/2021 Davide Scigliuzzo and Katherine Doherty
(Bloomberg) It’s the kind of rescue that the most indebted companies in America can only dream of: a fresh injection of cash that doesn’t hurt their already depressed stock price or load even more costly debt onto their balance sheet.
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Yet thanks to the army of day traders who use Reddit to tout and bid up out-of-favor stocks and squeeze short sellers, firms such as American Airlines Group Inc. and AMC Entertainment Holdings Inc. have found themselves on the receiving end of just such a lifeline.
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