Why did shares of GameStop and AMC soar?

It has been a big week for GameStop shares.The struggling video game retailer was trading above $450 a share Thursday morning, more than double its close of $147 on Tuesday. At the start of 2021, shares of GameStop closed at $17.25 on Jan. 4. Since then, shares have surged more than 1,000% this year alone, compared with just a 1% rise in the S&P 500, the broader benchmark for most mutual funds.The primary reason for the surge? Smaller investors who have banded together in places like Reddit, under the subreddit r/WallStreetBets.And it’s not just GameStop. Shares of AMC Entertainment jumped more than 230% Wednesday as the Twitter trend #SaveAMC spread amid concerns the movie theater chain might file for bankruptcy due to the COVID-19 pandemic keeping moviegoers away.Even BB Liquidating, the remains of former video rental giant BlockBuster, saw a spike in its price, reports Bloomberg.So what is going on? Here’s what you should know.What is r/WallStreetBets?According to a description on its subreddit, it’s “like 4Chan found a Bloomberg terminal.” It was created in 2012 and has 3 million followers discussing making money and trading stocks, options, futures and more.After the news gained steam, moderators switched to an invite-only status Wednesday evening. “We are experiencing technical difficulties based on unprecedented scale as a result of the newfound interest in WSB,” they said in a note on the site.Interest in r/WallStreetBets has garnered so much attention that Bloomberg expects the Securities and Exchange Commission will have to look at issues such as these for market influence. How did GameStop shares jump?Investors have been short selling the stock – borrowing shares, immediately selling them, then buying them back at a lower price before returning the shares – because of the retailer’s ongoing struggles as a brick-and-mortar chain competing with consumers increasingly shopping online.As those investors bet on GameStop’s price to sink, a group of traders on Reddit have joined together to drive the retailer’s stock price higher. Posts and threads from the subreddit seem to suggest this as an opportunity to stick it to Wall Street.One Reddit post describes the surge of these stocks as “a tug of war between tradition and the future.””Hedge fund managers live in the past, and continue to look down upon the retail investors,” reads an excerpt of the post on WallStreetBets. “They truly believe that we, the average retail investors, don’t know anything about finances or the market (which may be true), and we’re just gambling our money away.”The movement even got the attention of Tesla CEO Elon Musk, sharing the subreddit with a tweet simply saying “Gamestonk!” The billionaire has openly shared his disdain for short sellers over wanting to see shares in Tesla decline.Reddit said Wednesday afternoon the site is currently down for some users.How is Wall Street responding?Trading apps such as Robinhood, TD Ameritrade, E*Trade and Charles Schwab all appear to be suffering from outages, according to Down Detector, a website that tracks issues with online services.These apps have contributed to a rise in investing among individuals. As the Wall Street Journal reports, individual investors accounted for nearly 20% of shares traded in the stock market, according to Bloomberg Intelligence.In a statement obtained by USA TODAY, TD Ameritrade said it is setting restrictions on trades involving GameStop and AMC.”In the interest of mitigating risk for our company and clients, we have put in place several restrictions on some transactions in $GME, $AMC and other securities,” said the company. “We made these decisions out of an abundance of caution amid unprecedented market conditions and other factors.”According to multiple reports on Twitter and Reddit, Robinhood has halted trading on GameStop. A representative from Robinhood could not immediately be reached for comment to confirm.Meanwhile, major investors Citron Research and Melvin Capital have both claimed they are pulling their bets on GameStop.The Associated Press contributed to this report. Follow Brett Molina on Twitter: @brettmolina23.

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