This week has been a crazy week for seemingly bad companies badly affected by the COVID-19 pandemic. We are of course talking about GameStop, and to a lesser extent companies like AMC Theaters and BlackBerry. It’s a long story, and we highly recommend catching up with our previous coverage if you’re new to all the drama.
however, the Cliff’s Notes version is that Wall Street hedge funds are going short on GME stocks for the long term, in hopes of the company’s eventual demise, allowing them to bring in billions in profit. However, Reddit community WallStreetBets has decided to “stick with the man” by buying shares of GME, causing the stock price to skyrocket. GME, which traded at less than $ 10 a share in mid-2020, is now trading at around $ 325. Needless to say, the ‘small’ day traders started banking early as hedge funds shook their shoes and lash out in an epic way.
So where do Robinhood and AMD play a role in all of this?
Which brings us to Robinhood, which angered WallStreetBets, day traders and even lawmakers after it announced that it would “ limit trades for certain securities to closing positions only, including $ AAL, $ AMC, $ BB, $ BBBY, $ CTRM, $ EXPR, $ GME, $ KOSS, $ NAKD, $ NOK, $ SNDL, $ TR and $ TRVG. Robinhood claimed it took the step to protect its clients from ‘significant market volatility’, although most of the people dealing with those particular stocks knew exactly what they were doing.
The trade block caused GME and AMC shares to fall 21 percent and nearly 50 percent respectively on Thursday [mostly] recovering from those losses on Friday.
But one company that was involved in this short selling / WallStreetBets counterattack is AMD. AMD is a company seemingly unrelated to the whole GME drama (other than making the CPUs and GPUs used in game consoles), but it was also placed on Robinhood’s limited stock list.
On Thursdays and Fridays, Robinhood limited its users to buying just one share of AMD. As you might expect, there was immediate outrage at this turn of events. Unlike GameStop, or many of the other companies targeted by Robinhood, AMD actually has a solid financial foundation.
In fact, AMD witnessed a 45 percent year-over-year revenue increase for 2020, and a 52 percent increase in full-year earnings to $ 4.35 billion. All of AMD’s business units were on fire, from standalone Ryzen and Radeon GPUs to the semi-custom chips used in the PlayStation 5 and Xbox Series S / X, to the EPYC data center processors. Despite the big gains, AMD was greeted with a dramatic drop in the stock price and subsequent interference from Robinhood.
Why is Robinhood targeting AMD now?
Redditor Bvllish was among the first to draw attention to the AMD light by Robinhood, quashing the move, stating:
This is important because it is blatant manipulation of AMD’s stock. By restricting the buying of a stock, Robinhood creates artificial selling pressure that can lower the stock price. AMD’s short-term interest rate (number of people betting AMD’s stock price will fall) has also risen over the past month. AMD also happens to be one of the most held stocks on Robinhood. An attack on AMD’s stock is an attack on the company.
There has been significant activity around AMD in the past three weeks, with short-term interest rates doubling from 52 million earlier in January to a current level of nearly 110 million. Given AMD’s booming financials, WallStreetBets and other day traders are smelling a rat (or maybe shorts selling long positions on AMD to maintain liquidity after a beating on GME).
Welcome to the end game. from r / wallstreetbets
Notice how [mainstream media] say a profit cut was ‘expected’ every [share price], “added zqv7.” And yet there was no run-up to the revenue to actually price it in. Suits covering suits. “
The fight against Robinhood and shorts is certainly not over
Popular opinion seems to be that WallStreetBets and its legion of self-proclaimed “degenerates” are preparing to push AMD stocks now, and Robinhood doesn’t want to be caught flat-footed. However, these restrictions only add to the mistrust of the company by the users and the scrutiny of lawmakers, including the SEC – something that most trading companies try to avoid at all costs.
The mockery of Robinhood has grown in just a few days as its actions – while legal – are at odds with a move determined to beat Wall Street’s biggest hedge fund companies. The degenerate are determined to support businesses that are in bad shape, while also making some money for themselves.
Flown over Robinhood HQ from r / wallstreetbets
It seems that some “degenerate” are even using their newfound wealth to openly mock Robinhood in broad daylight (as shown in the video above). This is a quick turnaround in fortunes for Robinhood, which has been praised for its ease of use and accessibility for casual merchants. However, Robinhood’s namesake’s turn to ‘steal from the rich and give to the poor’ seems to be turned upside down here, which explains why his feet are now held to the proverbial fire.
As of now, it looks like AMD has been removed from Robinhood’s restricted stock list as a result of the outrage, but we don’t know if that will be the case tomorrow, when the market officially reopens. Whatever the outcome, Robinhood’s reputational damage has clearly already been done, and it will be interesting to watch the fireworks if the SEC then takes action against the company.