Update (11:30 a.m. ET): After dropping earlier, GameStop and other heavily shorted stocks are rising after trading app Robinhood lifted some trading restrictions. Reports say clients can now purchase up to 100 shares of GameStop and raised limits on AMC, Express, BlackBerry, and others.
GameStop (GME) dropped more than 50 percent on Tuesday morning, as many Reddit WallStreetBets (WSB) users continue to urge others to buy and hold the stock. As of 11:30 a.m. ET, the stock was appearing to make a rally and was down 39 percent.
It came as billionaire Dallas Mavericks owner Mark Cuban held a question-and-answer forum on the popular sub-Reddit, urging the users to buy and hold no matter what.
“No disruption is easy or happens in a straight line. Stay with it. I am a believer,” he wrote.
“Thanks for changing the game. Thanks for taking on Wall Street. Thanks for making kids around the country if not the world, including my son, want to learn about stocks and try trading them (Including my son and daughter). WSB changed the game far more than everyone on this board will ever get credit for,” Cuban said.
The “Shark Tank” host said he believes that “funds” and other “big players” have shorted GameStop again “thinking they are smarter than everyone on WSB,” referring to the forum.
“I know you are going to hate to hear this, but the lower it goes, the more powerful WSB can be stepping up to buy the stock again,” he wrote. “The only question is what broker do you use . Do you stay with RH , who is going to have the same liquidity problems over and over again, or do you as a group find a broker with a far, far, far better balance sheet that wont cut you off and then go ham on Wall Street.”
But other so-called meme stocks caught up in the Reddit rally also sold off. AMC Entertainment and Koss Corp each dropped by a third, while BlackBerry Ltd and Bed Bath & Beyond Inc showed double-digit percentage losses.
“The rally is likely over (since) the short positions are pretty well taken care of,” said Paul Nolte, portfolio manager at Kingsview Asset Management in Chicago. “That’s the game you play when you do this thing. It can work for a while until it stops working and when it stops working, it reverses pretty quickly.”
Robinhood’s trading app recorded more downloads than any other U.S. trading app last week, despite concerns about its restrictions on transactions involving some heavily shorted stocks.
The GameStop saga is likely to expedite a regulatory review of the role non-bank firms play in financial markets, regulatory experts said.
Reuters contributed to this report.