In January 2021, shares of GameStop went from a price of $18 per share to a high of $480 per share due to both market factors and its popularity as a “meme stock”. The stock’s popularity caused some broker-dealers to restrict trading on January 28. On October 18, 2021, the SEC released a report with their analysis of what happened and why.
The report concludes the explosion of the stock was due to 5 factors:
At the end of the SEC’s report, four areas of possible improvement were identified: forces that may cause a brokerage to restrict trading, digital engagement practices and payment for order flow, trading in dark pools and through wholesales, and short selling and market dynamics.
While many market experts expected the 45-page report to claim the price spike was due to a “short squeeze”, it pointed more towards the social media attention as the main cause. The report also did not suggest any changes to the market structure or trading process, leaving investors wanting more answers.