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Friday, March 5, 2021

Nation

UH students frustrated in fallout from GameStop stock frenzy


Juana Garcia/The Cougar

Some UH students were among the many who were left frustrated in the aftermath of the GameStop stock debacle that has left Wall Street shaken.

Robinhood, a popular trading and investing app, restricted transactions of GameStop stock after its value skyrocketed in the past few days. Some, like finance student Trevor Woeste, have not taken it well.

“I think it is absurd that trading platforms are allowed to just ban people from buying shares of certain stocks willy-nilly,” said finance student Trevor Woeste. “People have already said this, but it is similar to unplugging the controller to a video game because you are losing.”

Robinhood’s actions garnered the attention of senators on all sides of the spectrum, with government institutions getting involved. Class action lawsuits has even been filed in New York against the brokerage firm.

For finance professor Tom George, the restrictions are unlike anything he’s seen in his career.

“Regulators and markets sometimes suspend trading altogether in a security for everyone, or restrict short selling of the security for everyone,” George said. “But this is the first time of which I am aware that a subset of investors was suspended from buying a publicly traded security by their own agent.”  

The market volatility has largely been fueled by users on Reddit, where hundreds of members of the r/wallstreetbets subreddit coordinated to raise the share price of the company, which allowed them to short the stock prices and make a substantial profit.

“Stock prices are determined by supply and demand just like the prices of everything else,” George said. “If demand for a stock increases (for whatever reason), its price will rise.”  

George said that the price of a stock is a good indicator of what the value of owning a share in a company could be, but investors said that the new demand is increasing the value of this stock over what the GameStop stock is actually worth.

Some students at UH have been members of r/wallstreetbets for a while and have been able to follow how young traders have shaped the way they trade in the stock market. 

“One of the cool things about WallStreetBets was how coordinated it became recently,”  said Isaac Kunthara, a junior studying finance. “So much consensus and traction behind these analysis posts and movement-based posts, I’m all for this kind of thing.”

“The special thing is that it’s extremely transparent,” he added.

José R. Reyes, a UH political science alumnus who joined the online community before the recent events, was angry with Robinhood after its restrictions.

“I am upset at this situation,” he said. “After all this, I know I want to leave these brokerage firms who are willingly blocking free trade.”

Reyes wasn’t alone in his sentiment.

“Last I checked, it wasn’t illegal in a free market to buy stocks that are publicly traded,” said public relations student Alberto Huichapa. “But I guess the people at Robinhood have decided that’s not the case when they froze trading to specific stocks.”

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