Online group’s stock trades draws attention of regulators, angers investors

PEACHTREE CORNERS, Ga. — It’s a stock market battle nobody really saw coming, a war between institutional stock traders and an online stock trading community.

The ongoing battle sent Friday’s stocks tumbling and the implications could be far reaching with Metro Atlanta companies such as Coca-Cola, Delta and Home Depot all feeling the sting.

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It appears to have started a few weeks ago when many of the six million members of a Reddit group called Wall Street Bets decided to start investing in struggling companies. They began using a trading platform and application called Robinhood which allows individuals to trade as much as they want without paying fees.

The flurry of activity has drawn the attention of the Securities and Exchange Commission. The SEC has opened an investigation to see if any of it qualifies as criminal activity.

Channel 2′s Michael Seiden spoke to former SEC regulator Amy Lynch. Lynch is the founder and president of a company called Frontline Compliance.

Lynch says the investigation is important because long-term, the activity could potentially have a major impact on the stock market.

“That could be causing systemic issues to the market and cause a crash, or a mini crash. It’s like going into the casino in Las Vegas and making a big bet with all of your chips on one number at the blackjack table,” said Lynch.

The focus of controversy centers on video game retailer GameStop. Since the beginning of the year, the company’s share price has gone from $19 to as high as $482 before closing at $325 Friday afternoon.

Lynch explained that Wall Street Bets plan was to start trading in the securities of struggling companies to drive up the price for hedge fund investors who often sell the low selling stocks short, betting they’ll go down.

“They said ‘Hey! What if we start trading in these securities and we can drive up the price of those issuers and knock the shorts out? The regulators will take a look at that and if there are any professional traders that are part of the scheme , they can go after them,” said Lynch.

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Seiden talked with Perry Birbrager of Peachtree Corners who describes himself as an “amateur trader”. Birbrager has been playing the stock market through the pandemic. He believes some of his success is due to Wall Street Bets.

“You research and find out what’s going on and join these Reddit communities and see what people are getting into,” said Birbrager.

Perry bought shares of companies like GameStop and AMC Theaters, both have been hit hard by the pandemic.

“I had a goal to reach by December of this year. My goal was to take that money and buy a new car. And I’m pretty much there now, so it’s been pretty good,” said Birbrager.

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Seiden also spoke with Alex Reffett of the Atlanta’s East Paces Group. Reffett had advice for anyone who thinks this is all free money.

“What’s most unique about this is some of the fundamentals weren’t there and I think that is what caused some of the controversy. People should be cautious and certainly not see this an opportunity to make free money. This will come to an end. It will be interesting to see when it comes to an end and who ends up getting hurt, because there will be pain,” said Reffett.