Robinhood CEO reveals plan to avoid another GameStop buying halt

Core Insights - The GameStop stock experienced a significant surge in early 2021, driven by retail investors on social media platforms, particularly Reddit's r/wallstreetbets, which led to a short squeeze that affected hedge funds heavily shorting the stock [1][3][5]. Group 1: Company Overview - GameStop is a video game retailer that faced challenges due to the rise of digital gaming and reduced foot traffic during the COVID-19 pandemic [2]. - Hedge funds, including Melvin Capital, initiated short positions on GameStop's stock, anticipating further declines in its value [2]. Group 2: Market Dynamics - In January 2021, retail investors began purchasing GameStop shares and call options, influenced by social media discussions, which resulted in a dramatic price increase and put short sellers at risk of a short squeeze [3][5]. - The stock price skyrocketed from $2.5 in April 2020 to $483 by January 28, 2021, even exceeding $500 in pre-market trading on that day [5]. Group 3: Trading Restrictions - On January 28, 2021, Robinhood Markets halted the buying of GameStop shares, allowing only the closing of existing positions, which led to a significant drop in the stock price by over 40% [6][7]. - This decision drew criticism from public figures, including Rep. Alexandria Ocasio-Cortez, who highlighted the disparity in trading freedom between retail investors and hedge funds [8].