Market Madness: GameStop and Silver
Silver temporarily replaced GameStop as the breakout focus. Over the weekend, the precious metal encountered a surge of interest along with an uptick in online chatter about the chances for generating the kind of price increases that grabbed the world’s attention last week. On Monday, the price of silver jumped as much as 11.5 percent in early trading — to the highest level in eight years — but gave up some of its early gains, and ended the day at about $29 per ounce, a 7 percent increase. That was still throughout its highest level since early 2013. It fell on Tuesday.
Shares of GameStop fell about 31 percent on Monday and were set to fall further on Tuesday. Short interest in GameStop, a measure of the volume of bets against the stock, fell by more than half last week, according to the market-data firm S3 Partners, suggesting that the gambit inflict financial pain on Wall Street institutions by creating a so-called short squeeze may have worked. Robinhood decreased the number of companies with trading restrictions to eight from 50, according to an update on its website.
Robinhood raised an additional $2.4 billion over the weekend, adding to the $1 billion it had to seek from its investors earlier last week. On Thursday, an arm of the Depository Trust and Clearing Corporation, Wall Street’s main clearinghouse for stock trades, demanded $3 billion in additional collateral from Robinhood, to cover risky trades by its customers, according to Vladimir Tenev, the brokerage firm’s chief executive. That demand was later reduced to about $700 million.
Melvin Capital Management, one of the hedge funds pilloried on social media message boards for its short-selling bets that GameStop shares would fall, lost 53 percent on its portfolio in January, a person familiar with the matter said. A principal reason was the huge losses the firm suffered when small investors bid up the stock of GameStop.