Here’s Why GameStop Stock Plunged Today

What happened

GameStopit is (NYSE: GME) The stock price fell more than 30% on Monday as Robinhood and other trading platforms limited investors’ ability to buy the video game retailer’s shares.

So what

Amid volatile trading that has driven prices of GameStop and other stocks sharply short in recent weeks, popular millennial-focused trading platform Robinhood has imposed severe restrictions on the ability of its users to buy these and other stocks. On Monday, investors were only able to buy 20 shares of GameStop, a total that included all the shares they already owned. However, they could freely sell their shares.

As brokerages imposed trading restrictions, GameStop shares lost 30% of their value. Image source: Getty Images.

Robinhood claimed it was forced to impose purchase limits on GameStop and other volatile stocks in order to comply with clearing house deposit requirements. Robinhood CEO Vlad Tenev said the brokerage “needed to comply with our regulatory capital requirements”.

Now what

Financial experts such as Jim Cramer have been urging individual investors to take profits in GameStop in recent days. With its stock price still up more than 1,000% year-to-date, many analysts consider GameStop’s stock to be grossly overvalued.

“Take the home run,” Cramer said Friday. “You have already won.”

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end consulting service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.

About John A. Provost

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