KEY POINTS
  • Shares of GameStop skyrocketed 400% in the past week, closing out January with a whopping 1,625% gain.
  • A band of amateur traders on WallStreetBets aimed to bid up heavily shorted stocks "to the moon," creating massive short squeezes.
  • Members in the Reddit forum have tripled to 6.5 million in just a week.
  • The mania backfired on free-trading pioneer Robinhood, which had to throttle back trading in the short-squeeze names and raise new funds to meet rising deposit requirements with its clearinghouse.

GameStop mania took Wall Street by storm, thanks to a legion of retail traders glued to the WallStreetBets message board on Reddit.

Shares of the struggling brick-and-mortar video game retailer skyrocketed 400% in the past week, closing out January with a whopping 1,625% gain. A band of amateur traders in WallStreetBets forum, whose members have tripled to 6.5 million in just a week, aimed to bid up heavily shorted stocks "to the moon," creating massive short squeezes that some believe caused a turmoil in the broader market.

The rally backfired on Robinhood, the free-trading pioneer and popular app. The young broker that wants to go public this year had to tap credit lines, raise new funds and throttle back trading in a list of the short-squeeze names. We learned Saturday morning in a new post from Robinhood why, with the broker explaining that the central Wall Street clearinghouse mandated a ten-fold increase in the firm's deposit requirements on the week in order to ensure smooth settlement in trades involving the securities experiencing unprecedented volatility.