Robinhood backlash after GameStop move

Amateur traders take aim at some of the most powerful hedge funds and set their sights on new targets after GameStop stock surges.
5:09 | 02/01/21

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Transcript for Robinhood backlash after GameStop move
Amateur investors have been leading a wild ride on Wall Street coordinating to buy stock in GameStop. They're taking on hedge funds were betting against that stock and some of those investors are making a lot of money. Now they're setting their sights on new targets our chief business correspondent Rebecca Jarvis has the latest. This morning all eyes on an epic David and Goliath showdown. Amateur investors taking aim at some of the most powerful hedge funds in the country leaving the hedge funds reeling amidst billions in losses it's really the spirit are. And how many wondering if the am a church workers who share tips on read it have set their sights on a new target silver. Overnight the price of the metal jumping hash take silver squeeze trending on Twitter. Last week the new guys banding together on social media buying stock in struggling companies like AMC and GameStop. Who shares surged 400%. Last week. Never thought I would do anything like a trading it means. And for the hedge funds that were betting against those so called means stocks staggering losses a source familiar with top investment firm melding capital telling ABC news. The hedge fund lost 53%. On its investments in the month of January. And they're not alone. Now investors closely watching Robin Hood the trading app with more than thirteen million users at a median age of 31. There was ready to investors now criticizing online brokerage Robin Hood which plans to limit the trading of eight stocks today including GameStop AM see Blackberry express and no key. To just one share purchased per customer. I'm gonna take my bet that somewhere else or they won't put a restriction on what shares I can't count by the chaos drawing the attention of the federal regulators. In an op Ed published in USA today rob good CEO Vlad ten have. Reading that the moves to limit trading of specific stocks was not because we wanted to stop people from buying these or any stocks. But because of an increase on mandatory collateral on the service. 10 am also warning it is possible be unusual and dramatic market swings could occur again. And Rebecca joins us now for more on this Rebecca good morning you know Robinette has gotten a lot of backlash for restricting share purchases in companies like GameStop. What does it mean for trading this week and if the company trying to make moves to prevent that from happening again. Mother Deb really looking at this very carefully Diana and I think it's important for people to keep in mind. Robin Hood which has thirteen million users median age of 31 is one of many trading apps they have restate some restricted trading in stocks like GameStop but so have a number of other trading apps they just haven't gotten the same degree of attention in some cases because Robin Hood happens to be. The preferred app among young millennial and gen Z investors who. Really got interests in trading throughout the pandemic and we're seeing. This of mania this excitement in a handful of stocks as well as silver today. And I just want to really underscore the thinking here. That Diane you don't have to fully understand what's happening in the market or the mechanics of this to know your history and historically speaking. When things get euphoric the way that we're seeing them in individual stocks it typically does not end well when you get to these. In same levels as many would call them and in fact the one of the investors people who remember that will be the big short. Well one of the people who was pivotal in that fell Michael Burry has called this just on insane unthinkable what's going on in the stock of GameStop. So when we get to levels like this it's always something to keep in mind as you're standing by on the sidelines or your participating in trading that typically speaking it does not and well for the little I die out this summer back toward. Long term implications here not only for the average investors now I'm newly participating. But also for in general how these trades are done we're seeing me in the opening bell there ring on the stockings James could we. Could do think we could see change in how hedge funds do business in how short sellers operate. You know it's something that the. Actually the and other regulators. Are certainly going to be looking at here you hear the opening valley stocks overall today are opening higher Diane. But but I. Think what really is going Q. The I key and pivotal here is what happens to the person who's watching all of this from the sidelines not averages meant. What does it mean for their competence how did they look at the stock market differently. And also how does this new group of young investors to it in the best case scenario they've been encouraged to think about trading and investing for the long term. How did they approach the next wave because this is the wave for now this is the mania for now but in the long run it's about putting that money away in a 401K and an irate and frankly not enough people are doing that for the long term that is the way you can save for retirement that is historically the thing that pays off. For everyone not just the lucky few who time it right Diana Knight good tips Rebecca Jarvis thank you.

This transcript has been automatically generated and may not be 100% accurate.

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