Reddit investors shake up Wall Street — again

By CNN Business staff

Updated 5:39 p.m. ET, January 29, 2021
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8:42 a.m. ET, January 29, 2021

GameStop's CEO is now worth nearly $1 billion

From CNN Business' Paul R. La Monica

GameStop (GME) CEO George Sherman has been quiet during this Reddit vs. short seller drama. But the stock's huge spike is great news for him.

He owns a 3.4% stake in the company: 2.36 million shares that now are worth more than $800 million, based on premarket action Friday.

Sherman hasn't made any media appearances this week. He was quoted in a press release about the company winning top marks as a place for LGBTQ workplace equality. But he's been mum about the stock's breakneck volatility.

Sherman is a retail veteran who joined GameStop as CEO in 2019 after previous stints at Advanced Auto Parts (AAP), Best Buy (BBY), Home Depot (HD) and Target (TGT).

Meanwhile Ryan Cohen, the Chewy (CHWY) founder who is now on GameStop's board, runs a fund that owns nearly 13% of GameStop -- a stake now worth about $3 billion that makes it the second biggest investor in the company.

Big money managers Fidelity, BlackRock, Vanguard and Susquehanna are the other top five shareholders.

And Donald Foss, a retired billionaire who is the founder of subprime auto lender Credit Acceptance Corp (CACC), bought a 5% stake in GameStop last year that's now worth $1.2 billion.

10:23 a.m. ET, January 29, 2021

WallStreetBets is in uncharted territory

From CNN Business' Jon Sarlin

Max Pepper/CNN
Max Pepper/CNN

WallStreetBets' burst into the mainstream has left it in uncharted territory.

The legal side of things

There are the legal questions surrounding the site's collective push to boost GameStop's shares, with the SEC announcing in a statement that it is "aware of and actively monitoring" the volatility of the markets.

The White House and newly sworn-in Treasury Secretary Janet Yellen are "monitoring" GameStop's stock bonanza and WallStreetBets briefly went private on Wednesday, as the moderators made the site private to "ensure Reddit's content policy and the WSB rules are enforceable."

On Thursday, Robinhood, the trading platform of choice on WallStreetBets, made a controversial move to limit trading on GameStop, AMC, Nokia and other stocks promoted on the subreddit.

Reddit said in a statement to CNN Business that its "site-wide policies prohibit posting illegal content or soliciting or facilitating illegal transactions. We will review and cooperate with valid law enforcement investigations or actions as needed."

The community

And even if the forum survives scrutiny — whether regulatory, legal or from Reddit — it will have another issue to contend with. When part of the draw of a place online is the community, the shared language and jokes and memes, what happens when new people unfamiliar with any of that come suddenly flooding in?

8:35 a.m. ET, January 29, 2021

Free trading apps soar to the top of App Store chart

From CNN Business' Jordan Valinsky

It's not just Robinhood. Tons of other finance apps that offer free trading are topping the charts of the Apple App Store.

Reddit, where a lot of the conversation is happening, is also on the list this morning:

8:36 a.m. ET, January 29, 2021

Inside the Reddit army that's crushing Wall Street

From CNN Business' Jon Sarlin

This past week has been a banner one for Reddit's island of misfit investors.

WallStreetBets exploded into the mainstream, moving from the front page of Reddit to the front page of the New York Times and nearly every other major news site. The subreddit's short-squeeze of GameStop helped shoot up the price of the video game retailer's stock a mind-boggling 1,700% from the beginning of January to Wednesday (before it fell again Thursday), captivating the minds and wallets of investors — both casual and institutional — and financial regulators.

But while millions are now discovering WallStreetBets for the first time, it has been building momentum throughout the pandemic.

One can trace its epic rise to a perfect storm of favorable conditions: the exponential growth of the app Robinhood and its no-fee options trading, the extreme volatility Covid-19 brought to the markets, the stimulus checks mailed to millions of Americans, the lack of televised sports for much of the year, and the unwanted free time stuck at home the pandemic has forced on many people.

Describing itself as if "4chan found a Bloomberg terminal," the forum's giddy nihilism, inscrutable language and memes fueled a war on a perceived corrupted mainstream.

And it's led WallStreetBets' evolution into an unprecedented force of retail-investing financial radicalism, offering the allure of get-rich-quick gains to a rapidly expanding audience of millions. (5, at last count).

Read more about the epic rise of WallStreetBets.

8:18 a.m. ET, January 29, 2021

Robinhood raised $1 billion after halting GameStop purchases

From CNN Business' Matt Egan

New this morning: Robinhood raised $1 billion from existing investors just hours after it halted purchases of GameStop, suggesting the free-trading app faced a potential cash shortage.

The startup faced a bipartisan backlash Thursday for its decision to limit trading — a move that ran counter to its stated mission of democratizing investing.

This is a strong sign of confidence from investors that will help us continue to serve our customers," Robinhood said in a statement.

Read more here.

6:52 a.m. ET, January 29, 2021

Jon Stewart joins Twitter and defends the Redditors

From CNN's Mallika Kallingal

Comedian and former "Daily Show" host Jon Stewart is finally on Twitter, and his first tweet was about the GameStop-Reddit mayhem on Wall Street.

"This is bulls**t. The Redditors aren't cheating, they're joining a party Wall Street insiders have been enjoying for years. Don't shut them down...maybe sue them for copyright infringement instead!!
We've learned nothing from 2008."

Stewart in his second tweet offered thanks for a warm welcome to the social media platform and promised "to only use this app in a sporadic and ineffective manner."

8:13 a.m. ET, January 29, 2021

Robinhood eases trading restrictions; GameStop stock soars 100%

From CNN Business' Paul R. La Monica

GameStop traders sent the stock on a wild ride Thursday, and it looks set for another manic session Friday. Shares are up 100% in premarket trading.

The stock lost more than 44% of its value on Thursday after surging nearly 40% at one point earlier in the day. Adding to the drama? The trading platform Robinhood restricted trading in the red hot stock as well as several others.

The backlash was swift, and hours after implementing the restrictions, Robinhood said it would resume limited buys on those securities starting Friday.

Read more here.

6:38 a.m. ET, January 29, 2021

Dogecoin soars 370% as Reddit group works to send the cryptocurrency 'to the moon'

From CNN Business' Michelle Toh

Dogecoin is the latest target of hyped-up Reddit users.

The virtual currency, which originally started as an internet parody based on a viral dog meme, has skyrocketed 373% in the last 24 hours, according to Coinbase. At one point, it was up 613%.

One dogecoin is now worth a mere $0.0469, but that's still easily at record levels.

It's the latest bizarre twist in the retail investing revolt making front pages all over the world. The surge came after a popular Reddit forum — not unlike the WallStreetBets group behind GameStop's rally — set its sights on pumping up the digital currency.

Read more here.

6:37 a.m. ET, January 29, 2021

Robinhood CEO: 'We absolutely did not' restrict GameStop trading at the direction of a hedge fund

From CNN Business' Clare Duffy

Robinhood CEO Vlad Tenev explained what he called the platform's "very difficult decision" to restrict buying of GameStop (GME) and about a dozen other securities during a Thursday evening interview on CNBC.

He said the decision was made in response to requirements Robinhood must adhere to as a brokerage firm.

"We have lots of financial requirements, including SEC net capital requirements and clearinghouse deposits — that’s money that we have to deposit at various clearinghouses," Tenev said.

He added that such requirements can fluctuate based on market volatility and can be "substantial in the current environment where there’s ... a lot of concentrated activity in these names that have been going viral on social media."

He added: "In order to protect the firm and protect our customers, we had to limit buying in these stocks."

Tenev also shot down speculation spread on social media Thursday that Robinhood restricted regular trading of the volatile stocks at the request of large Wall Street firms.

One Robinhood user alleged in a class action lawsuit filed against the trading platform Thursday that the move was made "knowingly to manipulate the market for the benefit of people and financial institutions who were not Robinhood’s customers."

We absolutely did not do this at the direction of any market maker or hedge fund or anyone we route to or other market participants," Tenev said on CNBC.

The company plans to allow limited buying of the volatile stocks it restricted starting on Friday morning.

Of course Robinhood stands for everyday investors," Tenev said. "It pains us to have had to impose these restrictions, and we’re going to do what we can to enable trading in these stocks."