Robinhood, along with other brokerages like Interactive Brokers and Webull, restricted buying of GameStop (GME) stock on January 28, 2021. The move, which limited users to "position closing only" (selling), was driven by massive collateral demands from clearing houses (DTCC) due to extreme volatility.
GameStopped: How Robinhood's GameStop Trading Halt Reveals the Complexities of Retail Investor Protection.
Even the stories of some of the traders Dumb Money was based on, and who I talked to for this story, are far from cut and dried. Some big names lost money on GameStop, but others made a bundle. The same goes for everyday investors — some won, some lost, and plenty were just in it for the casino-like ride.
Robinhood, Interactive Brokers, and WeBull Financial shut down the buying feature for shares of GameStop (GME) and other hot stocks on its app Thursday after a wild week of trading: GameStop stock was $65 at Friday's close, rocketing to $347 at Wednesday's close, a 437% gain.
On January 28, some brokerages, particularly app-based brokerage services such as Robinhood, halted the buying of GameStop and other securities, citing the next day their inability to post sufficient collateral at clearing houses to execute their clients' orders.
Although GameStop's legacy retail business is facing decline, as observable in the 4.6% Y/Y revenue drop in Q3-FY2025, the aggressive cost rationalization (SG&A down 21.5% Y/Y) has stabilized profitability. The primary risk for my GameStop buy thesis is capital misallocation and stagnation.
The rising stock value allowed Gill to turn an initial US$53,000 investment into $50 million by January 2021. Between 2021–2024, Gill kept a low profile but continued to increase his GameStop ownership.
Gill's belief in GameStop didn't just make him famous—it made him incredibly wealthy. After exercising his call options, Gill still holds 9,001,000 shares of GameStop. At today's price of $29.70 per share, those shares are worth about $267 million.
Known as "Roaring Kitty" on YouTube and "DeepF***ingValue" on Reddit's popular WallStreetBets, Gill was a key figure in the so-called "Reddit rally" in which shares of GameStop surged 1600% at one point in Jan. 2021, crushing hedge funds that had bet against the videogame retailer.
Michael Burry made approximately $100 million personally and generated over $700 million for his investors by shorting the U.S. housing market, a move that paid off spectacularly during the 2008 financial crisis, with his firm Scion Capital realizing huge returns like 489% between 2000 and June 2008.
But the day after GameStop reached its peak, Robinhood abruptly restricted trading in some meme stocks, claiming that it had been forced to do so by a liquidity crunch, Wall Street rules and clearinghouse limits. The restrictions caused the stocks to plunge, prompting lawsuits, congressional hearings and an S.E.C.
Campbell only sold five of those shares, making more from that sale than she spent on the investment of the 100. She still holds the remaining shares.
The hedge funds that shorted GameStop before the squeeze began lost vast sums of money. The worst hit was Melvin Capital, which lost $6.8 billion in a month. But many investors — a large proportion of them students — enjoyed big gains. Keith Gill himself is believed to have made more than $30 million.
2021 losses
In early 2021 the fund lost over 30% due to numerous short bets that went awry, including GameStop. Users of the subreddit r/WallStreetBets made widespread bets believing that GameStop's stock would increase in value.
Keith Gill, known online as "Roaring Kitty," is credited with triggering the GameStop stock rally in 2020, when he posted online that he believed the shares were undervalued. As of June 13, 2024, Gill's net worth includes more than 9 million GameStop shares valued at $262 million, and about $6.3 million in cash.
Cohen's incentives are directly aligned with creating long-term value for GameStop's stockholders. Since joining the Board of Directors in January 2021, Mr. Cohen has overseen a significant turnaround of the Company's financial health and operational efficiency.