Mandatory Short Selling Disclosure Could Lead to Investor Herding Behavior

Commission-free trading apps like Robinhood and coordinated action by retail investors on Twitter, WallStreetBets, and other social media have created an unprecedented force on Wall Street that specifically targets short sellers. One result has been a massive run-up in the stock prices of GameStop, AMC, and other “meme” stocks in 2021, presenting the SEC with the challenge of promoting the efficiency of capital markets – even as the prices of these meme stocks substantially deviate from firm fundamental value –  while simultaneously protecting retail investors. AMC specifically warned its investors in a June 3, 2021, filing that, “We believe that … Read more