Is a new day dawning as we speak? After a simply astronomical rise in Reddit stocks like GameStop (NYSE:GME) and AMC Entertainment (NYSE:AMC), it appears the bubble is bursting. GME stock is currently trading at $115, while AMC stock is trading hands for less than $9. Despite this fall from grace for top r/WallStreetBets names, Robinhood restrictions are still in place. What do you need to know now?
Many investors are likely familiar with the story at this point. Redditors sent a handful of stocks, largely of old-school retailers, up to new highs. Robinhood outright banned trading, and then levied a series of restrictions on popular names. In the days since the first bans, CEO Vlad Tenev has opened up a little bit more about the decision. It turns out that with high customer demand and high volatility, Robinhood needed more cash to pay the clearinghouse bills.
Now though, even as signs point to the bubble bursting in favor of other opportunities, Robinhood is keeping those restrictions in place. Here are the limits:
- AMC Entertainment (NYSE:AMC), 1,250 new shares
- Express (NYSE:EXPR), 3,000 new shares
- GameStop (NYSE:GME), 100 new shares
- Naked Brand (NASDAQ:NAKD), 12,000 new shares
- Nokia (NYSE:NOK), 2,000 new shares
You can read the full list here.
What to Know About the Robinhood Restrictions Now
So what do you really need to know about the Robinhood restrictions? And how do they fit into the bigger picture with the Reddit stocks rally?
The first part of the story here is that Robinhood continues to gradually ease restrictions. The trading platform went from outright banning new purchases, to levying strict limits on 50 equities. Since yesterday morning, it has knocked equities off that list and started to allow customers to acquire more new shares of each r/WallStreetBets favorite. However, even today, customers can only acquire 100 new shares of GameStop, perhaps limiting large-scale buy-the-dip sentiment. (Even those who want to buy 100 shares may not have the cash after the Reddit stocks plunge today).
Plus, customers still face limits on fractional share purchases, options trading and recurring investments. These ongoing Robinhood restrictions once again bring up the conversation between Tenev and Elon Musk. With perpetual theoretical limits, customers may be wondering how long Robinhood will keep these volatility-induced changes in effect.
As you look to the future, what do you need to know? Sure, the bubble in r/WallStreetBets winners may be bursting today. Even if GameStop and AMC do make a comeback though, Robinhood is in rocky territory. It remains a top platform, but customers continue to search for alternatives and second guess its 2021 IPO plans.
On the date of publication, Sarah Smith did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Sarah Smith is a Web Content Producer for InvestorPlace.com.
