Robinhood’s Forbidden-Stocks List Saw Price Swings Narrow Monday

(Bloomberg) -- Despite a 31% tumble in day-trader hero GameStop Corp. Monday, swings narrowed in the broader group of stocks that Robinhood Markets hit with trading curbs last week.

The average swing -- up or down -- in the 50 stocks the brokerage put on its restricted list narrowed to 11% from 14% on Friday. Overall, even with the GameStop flop, prices in the group rose about 3% Monday as the market rebounded.

Turbulence in stocks favored by its zero-commission clientele became a problem for Robinhood at the end of last week, when the Depository Trust & Clearing Corp. demanded the online brokerage boost the margin it has on deposit while trades settle. The company has raised at least $4 billion in debt and equity since then to shore up finances.

Robinhood has since whittled down its list of verboten stocks to eight from 50, but the remaining names are a who’s who of favorites from Reddit forum WallStreetBets. The restrictions keep Robinhood users from buying more than a single share of GameStop or two of headphone maker Koss Corp.

As the restrictions linger, Robinhood’s target audience is looking to migrate from the slick app to brokerages that have placed fewer limits on their customers. And a group of WallStreetBets members have organized to file a class-action lawsuit against Robinhood. The broker has come under fire from Democratic and Republican lawmakers, alike.

While users’ efforts to buy the volatile basket of shares have been stifled, trading data shows that institutional investors were able to freely trade shares. In total, 115 trades of 5,000 or more shares crossed the ticker tape on Jan. 29. The average value of those trades was $30 million, with the largest trade of the day encompassing more than half a million shares and a notional value of $127 million.

©2021 Bloomberg L.P.