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US: Yellen seeks answers after GameStop saga

February 5, 2021

US Treasury Secretary Janet Yellen is looking into the trading blip that sent shares of several struggling companies soaring. Meanwhile, trading app Robinhood lifted restrictions on all stock, including GameStop's.

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A GameStop shop is seen in the picture.
Image: STRF/STAR MAX/IPx/picture alliance

US Treasury Secretary Janet Yellen on Thursday chaired a meeting with key financial market regulators to discuss recent trading volatility, which sent shares like GameStop skyrocketing last week.

"We really need to make sure that our financial markets are functioning properly, efficiently and that investors are protected," she told  ABC's "Good Morning America" earlier in the day.

"We're going to discuss these recent events and discuss whether or not the recent events warrant further action.

Over the past two weeks, a community of small-time investors on Reddit came together to forestall hedge funds that made massive bets that the shares would fall.

But instead of a plunge, the share prices of struggling companies like — aging video game high-street retailer GameStop and film theater brand AMC Entertainment — shot up as investors saw a chance to upset the hedge funds' plans.

Robinhood lifts trading restrictions

Soon after the meeting, trading service Robinhood removed its temporary trading curbs on all stocks, including GameStop Corp and AMC Entertainment.

The online broker’s website on Thursday showed that the trading limit on GameStop's shares was set at 500, while for AMC the limit was set at 5,500 shares.

Shares headed back to the basement

Meanwhile, on Thursday, the shares of GameStop and others, which soared on the speculation, continued their equally steep decline.

GameStop shares closed down 42% at $53.50, way below their peak of  $483 a week ago — but still above the roughly $15 the previously stagnant stock commanded as recently as January.

AMC Entertainment, on the other hand, lost about two-thirds of its value.

Dogecoin surges after Musk tweet

Tesla Inc Chief Executive Elon Musk’s tweet advocating for cryptocurrency Dogecoin sent its value swelling more than 50%.

Musk's tweets about certain companies — including GameStop —  and cryptocurrencies have played a role in the recent market volatility, with Musk already somewhat renowned for a dismissive attitude towards traditional traders on Wall Street.

dvv/msh (AFP, Reuters)