Online trading

Use of online trading apps surges as Redditors take on Wall Street

In this photo illustration a Robinhood Markets logo seen displayed on a smartphone.

Raphael Henrique | SOPA Images | Light Rocket via Getty Images

LONDON — Online investment platforms are seeing a surge in usage as retail investors flock to historically unloved stocks like GameStop and BlackBerry.

GameStop shares started climbing wildly on Friday in an epic short squeeze. The brick-and-mortar video game retailer has earned a reputation as Wall Street’s most hated stock.

A wave of retail investors challenged GameStop’s short sellers in online forums. The Reddit community r/wallstreetbets, which has 2.8 million members, is inundated with users who encourage each other to accumulate and continue to increase the stock.

They found other favorites including software company BlackBerry and retail chain Bed Bath & Beyond.

The flurry of Redditors taking over Wall Street appears to have led to a boom in the use of stock trading apps which are used primarily by younger millennial traders. US investment app Robinhood, for example, has broke a record on Tuesday in the app rankings of business news firm Apptopia.

Robinhood ranked #8 in the company’s list of top iOS apps in the US, its highest ranking to date. Its usage has increased over the past two weeks, with the number of daily sessions — recorded when a user opens an app — rising to nearly 3.8 million on January 26, from nearly 3.6 million on January 17.

Robinhood was ranked the No. 1 financial app on the iPhone on Tuesday, according to App Annie, another app data company. Another trading platform, WeBull, has also grown in popularity, reaching 9th place among other financial apps.

“Like other brokerages, we are monitoring volatility and taking appropriate action, such as increasing margin requirements,” Robinhood co-founder Vlad Tenev told ‘Squawk Box’ on Wednesday. from CNBC.

“I think it’s wrong to assume that most of our business is characterized by trading volatile stocks.”

Meanwhile, Britain’s Freetrade said the value of buy orders for GameStop in the first two trading days of the week was already 177% higher than all of last week. BlackBerry purchases increased by 163% over the same period.

The startup, which has more than 300,000 users, said the number of premium accounts on its subscription brand Freetrade Plus had more than doubled since January 1. GameStop and some other stocks with high levels of short-term interest, such as Bed Bath & Beyond, are only available on Freetrade Plus.

“It is a wake-up call for Wall Street and the Square Mile that retail investor flows are significant and should be taken seriously,” Dan Lane, principal analyst at Freetrade, told CNBC.

“If nothing else, the most recent episode should record new retail investors asserting that they want to participate in building their cash reserves rather than handing the job over to someone else.”

“Speculation Frenzy”

Incumbent UK brokerage Hargreaves Lansdown said GameStop was the second most popular overseas stock on its platform last week, while BlackBerry was the fifth most popular. GameStop was the most viewed action on its platform on Wednesday.

“Short sellers had been betting that this Texas-based company with more than 5,000 stores in malls around the world could be hit hard by the downturn in the pandemic,” senior investment analyst Susannah Streeter told CNBC. and markets at Hargreaves Lansdown.

“Renewed interest in the company on social media platforms, particularly Reddit, has instead sent GameStop’s stock price in the opposite direction. It appears on some chat groups that trading communities have embraced a ‘game’ mentality, deliberately buying GameStop stocks because they’ve been shorted.”

GameStop soared in extended trading on Tuesday, surging more than 60% and at one point hitting a high of $360. The after-hours jump came after Tesla CEO Elon Musk tweeted about the mania, linking to the wallstreetbets subreddit.

“While some of these stocks have become more sought after on our platform, we encourage traders to diversify their holdings and invest for longer term instead of short term gains,” Streeter said.

“We advise people to take a deep breath before following the herd, which means doing their homework and beware of being drawn into a frenzy of speculation.”