The “Reddit rally” continued full steam ahead on Wednesday as officials began to question whether they are dealing with a populist market insurrection or something more sinister.
Shares GameStop and AMC Entertainment posted one-day gains of 134 percent and 301 percent respectively — just the latest in what has been described in Reddit message boards as a “war” between novice investors against Wall Street elites.
“I want to help with this movement, and will hold the line!” one user recently wrote about his investment in video retailer GameStop.
But when asked about the dizzying heights being reached by stocks like GameStop, Nasdaq chief Adena Friedman raised the possibility of foul play.
Speaking on CNBC, Freidman said regulators need to question whether the “social media activity” behind recent stock surges might be a form of market manipulation known as a pump-and-dump scheme.
TD Ameritrade also signaled trouble ahead in announcing new restrictions on transactions of popular stocks like GameStop and AMC. The retailer brokerage said it added the trading limits “in the interest of mitigating risk for our company and clients.”
White House press secretary Jen Psaki also chimed in, saying that “Secretary Yellen and others are monitoring the situation,” while Federal Reserve chair Jerome Powell found himself dodging a question about GameStop during his press conference after the Federal Open Market Committee meeting.
GameStop’s shares have surged more than 700 percent in recent weeks, sending its market cap from around $1 billion to $24 billion on Wednesday.
The rally has been fueled by anonymous posters spewing populist rage at the Wall Street machine, which has tried and failed to bet against GameStop and other stocks.
Despite the concerns, the Wall Street pros seem to believe that they’ve simply been beaten by the masses. That includes Andrew Left of Citron Research, whose a Jan. 21 video predicting that GameStop shares would fall to $20 a share only prompted Reddit posters to double down, resulting in a zealous squeezing of the stock.
“It’s not a pump-and-dump if it’s just a lot of people buying and buying,” Left told The Post on Wednesday. “These are flash mobs who don’t respect the market and they’ve made trading into the lowest form of gambling.”
Left, who reported threats against himself and his family to the FBI, said he’s abandoned his failed effort to short the stock. Hedge fund Melvin Capital has also reportedly closed out its short position in GameStop after taking a huge loss.
Other hedgies say they agree with Left. “More power to the WallStreetBets crowd,” sighed Thomas Thornton of Hedge Fund Telemetry. “They figured out how to game the system, how to beat the shorts, and they won. Congratulations to them.”
“It’s not fraud, it’s not market manipulation, it’s not illegal,” said Francis Curran, a securities litigation attorney at Kudman Trachten Aloe & Posner. “This is not boiler rooms cold-calling people. It’s a spontaneous online revolution and the other side of these trades seem very unhappy about it.”