Reddit's WallStreetBets briefly goes dark after fueling GameStop surge

GameStop, up fivefold in three days, tumbled 37 per cent as of 7pm in New York.
GameStop, up fivefold in three days, tumbled 37 per cent as of 7pm in New York.PHOTO: AFP

NEW YORK (BLOOMBERG) - WallStreetBets, the internet forum fueling a frenzy of retail trading, briefly turned itself off to new users on Wednesday (Jan 27) after a deluge of new participants raised concerns about its ability to moderate content, a notice on the website said.

The WallStreetBets home page went dark to all users for a little over an hour Wednesday evening in New York. A message on the site shortly after 6.30pm in New York said it was experiencing technical difficulties due to a flood of new members, rendering moderators “unable to ensure Reddit’s content policy.”

An hour later, the forum appeared to return to business as usual, with the moderators pinning a post that said its rapid growth had made oversight difficult. The site had racked up more than three million members as day traders plugged companies from GameStop to AMC Entertainment Holdings, driving massive rallies that have burned hedge funds who had sold the stocks short.

Reaction to the brief outage was swift and painful in stocks favoured by the site. GameStop, up fivefold in three days, tumbled as much as 37 per cent before paring the loss. AMC, which doubled in Wednesday’s cash session, sank more than 50 per cent at one point before cutting that in half. Nokia, the one-time cell-phone giant that added 38 per cent in regular trading, gave up more than a third of that before recovering to trade lower by 6 per cent.

Broader stock gauges seemed unperturbed by the commotion. Futures on the Nasdaq 100 Index remained lower by about 0.4 per cent, weighed down by Tesla’s poor earnings report and middling results at Apple and Facebook.

The day-trading phenomenon landed in Washington on Wednesday, when the White House press secretary said US Treasury Secretary Janet Yellen and the Biden administration’s economic team are watching stock-market activity around GameStop and other heavily shorted companies. Federal Reserve chair Jerome Powell dodged questions on the topic at his regular policy press conference.

Senator Elizabeth Warren weighed in, saying she intends to make sure securities regulators “wake up and do their jobs.” Not long after, the Securities and Exchange Commision said it is “actively monitoring” volatility in options and equities markets.

Before the subreddit was taken private, there were 3.5 million members of r/wallstreetbets, according to the site. That’s nearly 1.5 million more users than there were just a week ago, according to Breakout Point, a data and analytics firm.

New followers began flooding copycat message boards on Reddit almost immediately. A forum calling itself WallStreetBetsNew, which was founded last year, ballooned to nearly 200,000 users, from about 71,000 earlier in the day.