“Where’s Ja Rule?” Apparently on Robinhood, With the Rest of Us
Ja Rule took to social media to relay some investing advice.
Last Tuesday (January 26), the finance world was violently shaken up when a Reddit campaign ultimately led to a record-setting increase in the value of Gamestop shares. The result? At least two hedge funds are in jeopardy of losing billions. Additionally, trading firms — from TD Ameritrade, Charles Schwab, to the upstart mobile app Robinhood — temporarily halted the purchase of certain stocks, only giving traders the option to sell their now-valuable shares. After news of the trading halt, Ja Rule took to Twitter to voice his frustration.
“Yo this is a f—-ing crime,” he wrote. “What @RobinhoodApp is doing DO NOT SELL! Hold the line…the hedge fund guy shorted these stocks now we can’t buy them, people start selling out of fear. We lose money, they make money on the short. This is a f—ing crime!”
Yo this is a fucking CRIME what @RobinhoodApp is doing DO NOT SELL!!! HOLD THE LINE… WTF 🤬
— Ja Rule (@jarule) January 28, 2021
They hedge fund guy shorted these stocks now we can’t buy them ppl start selling out of fear… we lose money they make money on the short… THIS IS A FUCKING CRIME!!!
— Ja Rule (@jarule) January 28, 2021
On the following Monday (February 1), Ja appeared on CNBC’s Squawk Alley to discuss Robinhood’s trading restrictions. Since his tweet-storm last Thursday, Robinhood and other brokerage firms have continued to restrict the volume of transactions for GameStop, AMC, and more.
“I love Robinhood,” Ja explained. “I love what they represent, putting the stock market in your pocket…I was really upset at what they did the other day. It felt like everything they stood for, even their names…it kinda all just went in the dump.”
In a conversation with Elon Musk on the audio app Clubhouse, Robinhood CEO Vlad Tenev explained that he halted trades on the so-called “meme stocks” like GameStop after the surge led to the company being asked to place a $3 billion deposit from the National Securities Clearing Corporation. The company had raised only $2 billion in venture capital, so after a brief negotiation, the NSCC reduced the requirement to $700 million.
For hours on Wednesday and Thursday, the purchase of stocks like GameStop and AMC were halted by all major trading hubs, which stops their share price from rising any higher. Thus, the prospect of amateur traders making small fortunes was extinguished. Thousands of people on social media, including New York Congresswoman Alexandria Ocasio-Cortez, were angered. On Thursday afternoon, a class action lawsuit was filed against Robinhood for its actions.
This is unacceptable.
We now need to know more about @RobinhoodApp’s decision to block retail investors from purchasing stock while hedge funds are freely able to trade the stock as they see fit.
As a member of the Financial Services Cmte, I’d support a hearing if necessary. https://t.co/4Qyrolgzyt
— Alexandria Ocasio-Cortez (@AOC) January 28, 2021
Since December, users from the Reddit page Wall Street Bets inflated the value of GameStop’s shares by a jaw-dropping 1700%. Between Tuesday and Wednesday, the company’s market value rose over $10 billion.
The mission of the Wall Street Bets subreddit was to exact vengeance on funds like Melvin Capital. The group soured on this particular fund when it was disclosed that the fund owned stock options that profit from GameStop shares falling. The idea of boosting the shares’ prices at the hedge fund’s expense eventually became a meme. Now, many amateur traders — a mix of professionals, students and day trading enthusiasts — have accrued astronomical returns on their investments. That is, until the firms started halting purchases.
For now, the shareholders still holding onto GameStop stock will have to wait to claim their winnings. Stay tuned for further updates involving the Robinhood lawsuit.