In January 2021, Robinhood halted buying of GameStop (GME) shares because the{" "Depository Trust & Clearing Corporation (DTCC)" "}demanded a massive, sudden increase in collateral to cover high-volume, volatile trades. Unable to meet these regulatory capital requirements, Robinhood restricted buying to mitigate risk and prevent a liquidity crisis.
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.
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.
Account restrictions on investment platforms like Robinhood often result from compliance checks, suspicious activity, or regulatory requirements. Customers should review any notifications from their bank or the platform explaining the restriction.
Robinhood Securities failed to comply with numerous aspects of the firm's reporting obligations for blue sheets (securities trading information), FINRA trade reporting facilities and the Consolidated Audit Trail.
A trading halt typically lasts less than an hour (but can be longer) and is called during the trading day to allow a company to "announce important news or where there is a significant order imbalance between buyers and sellers in a security."
During the height of the squeeze, Melvin was reportedly losing more than a billion dollars a day. The short position adopted by Melvin Capital and others resulted in more than 139% of existing shares of GME being shorted, making GameStop stock the most shorted equity in the world.
Vlad Tenev, the current CEO of Robinhood, lost his billionaire status and approximately $4.28 billion in money and assets after the GameStop short squeeze events. Baiju Bhatt, co-founder of Robinhood, stepped down as co-ceo but still holds the position of Chief Creative Officer and Director.
Short squeeze is a term used to describe a phenomenon in financial markets where a sharp rise in the price of an asset forces traders who previously sold short to close out their positions.
How Much is Roaring Kitty Worth? 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.
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.
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.
The US non-profit corporation (of which Robinhood Securities, LLC is a member) oversees the liquidation of firms that close when they are bankrupt or face financial troubles. The SIPC will protect the securities in your brokerage account up to a value of $500,000, including up to $250,000 in cash.
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.
Dumb Money dramatizes the true story behind working class Redditors turned investors who flipped Wall Street on its head.
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.
The 3-5-7 rule in trading is a risk management guideline: risk no more than 3% of capital on one trade, keep total risk across all trades under 5%, and aim for winning trades to be at least 7% larger than losing trades (or a 7:1 ratio) to ensure profits outweigh losses and protect capital. It promotes discipline, reduces emotional trading, and balances potential high rewards with controlled risk, making it great for beginners.
If a stock delists and is no longer available on major stock exchanges, Robinhood won't receive active market data for it, and the stock will turn gray.
A buy signal is given when price exceeds the high of the 15 minute range after an up gap. A sell signal is given when price moves below the low of the 15 minute range after a down gap. It's a simple technique that works like a charm in many cases.