Ohio State finance professor explains what’s happening with Robinhood and GameStop

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COLUMBUS, Ohio (WCMH/AP) — Robinhood and other online trading platforms are moving to restrict trading in GameStop and other stocks that have soared recently due to rabid buying by smaller investors.

GameStop stock has rocketed from below $20 earlier this month to more than $400 early Thursday as a volunteer army of investors on social media challenged big institutions who had placed market bets that the stock would fall. The stock fell, however, to around $240 after sliding more than 30% in midday trading.

Robinhood said Thursday investors would only be able to sell their positions and not open new ones in some cases, and Robinhood will try to slow the amount of trading using borrowed money.

This is so crazy that if this was the plot of an episode of Showtime’s Billions, people would think it’s too unrealistic.

Matt Sheridan, Senior Lecturer at Ohio State’s Fisher College of Business Department of Finance

Hedge funds have lost billions of dollars over the past few days, but what does this mean for the average person? Likely not too much, according to senior lecturer at Ohio State’s Fisher College of Business Department of Finance Matt Sheridan.

“What’s nice is for the average person, this is tied to a few stocks and a lot of these stocks that it’s tied to are stocks that are completely out of favor,” Sheridan explained. “Since it’s concentrated in just a few names, at this point, the overall market shouldn’t be too much of a concern.”

The online brokerages restrictions has politicians on both sides of the aisle calling for an investigation, including Rep. Joyce Beatty (D), whose district includes most of Columbus.

Beatty tweeted in reply to a Wall Street Journal article: “Companies like @robinhood, @CharlesSchwab, and @TDAmeritrade need to answer to Congress why they are rescuing their hedge fund customers at the expense of public investors.”

Ohio Sen. Sherrod Brown (D) pledged as the incoming chairman of the Senate Banking Committee to hold a hearing “on the current state of the stock market.”

In a rare move, Sen. Ted Cruz (R-Texas) agreed with Rep. Alexandria Ocasio-Cortez (D-N.Y.) that the move by Robinhood is “unacceptable.”

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