A slugfest between Wall Street and Main Street took an unexpected turn late on Wednesday after moderators of a stock trading forum that has helped fuel massive rallies in the shares of GameStop temporarily closed its doors.
Shares of GameStop and other companies tumbled in extended trading after Wallstreetbets, a discussion forum popular with retail traders on the Reddit website, briefly turned invitation-only. They pared those losses around an hour later, when the forum opened back up.
“We have grown to the kind of size we only dreamed of in the time it takes to get a bad night’s sleep. We’ve got so many comments and submissions that we can’t possibly even read them all, let alone act on them as moderators,” read a message from the group’s moderators after Wallstreetbets reopened.
Shares of GameStop, AMC Entertainment, Koss Corp and BlackBerry all dropped at least 20% moments after the shuttering of the forum, highlighting the role it has played in fueling stock rallies that many say have been driven primarily by retail investors.
Earlier in the day, amateur traders chalked one up versus Wall Street as hedge funds suffered heavy losses on short positions in GameStop, and regulators and financial professionals called for more scrutiny of trading fueled by anonymous social media posts.
In the latest skirmish in a week-long battle between Wall Street and Main Street, funds sold long positions in stocks to pay for losses shorting GameStop, contributing to a slide of more than 2% in Wall Street’s main indexes.
“We are moving to a world where ordinary folk have the same access as professionals and can come to the same conclusion or maybe the opposite,” technology investor Chamath Palihapitiya told CNBC. “The solution is more transparency on the institutional side, not less access for retail.”
The market turmoil caught the attention of the White House, with press secretary Jen Psaki saying President Joe Biden’s economic team – including Treasury Secretary Janet Yellen on her first full day on the job – was “monitoring the situation.”
Massachusetts state regulator William Galvin called on NYSE to suspend GameStop for 30 days to allow a cooling-off period.
“This isn’t investing, this is gambling,” he said in an interview. “This is obviously contrived.”
Nasdaq chief Adena Friedman said exchanges and regulators should watch whether anonymous social media posts could be driving “pump and dump” schemes.