The GameStop saga has taken an unexpected twist, with shares plunging after an investor forum on Reddit closed temporarily.
Pedestrians go past a GameStop store in lower Manhattan in New York. Photo: AFP
The wallstreetbets public forum had fuelled massive gains in a number of shares including GameStop, a US games company.
But those companies' shares fell sharply after the forum temporarily turned invitation-only.
The trading frenzy has spread globally and has led to a White House alert.
GameStop has been the main focus of attention of traders having seen its share price soar more than 300 percent in the past week. Experts say it is the result of a fight between private and professional investors.
After some frenetic trading activity, Reddit moderators closed the wallstreetbets forum to make adjustments after it was blocked on chat app Discord due to obscene content.
"We blocked all bad words with a bot, which should be enough, but apparently if someone can say a bad word with weird unicode icelandic characters and someone can screenshot it you don't get to hang out with your friends anymore," read a message from the group's moderators after wallstreetbets reopened.
Discord said its decision to block the forum had nothing to do with its apparent impact on share prices.
Shares of Gamestop, AMC Entertainment, Koss Corp and BlackBerry all dropped at least 20 percent moments after the forum was closed, although the companies recovered some of their losses when the forum reopened about an hour later.
Even with the pause, GameStop shares were selling at $US292 ($NZ410), compared with less than $20 just a few weeks earlier.
The fall highlighted the role the forum has played in fuelling stock rallies of several hundred percent that experts say have been driven primarily by private investors.
The massive GameStop share surge appears to be less about the company - which is a loss-making bricks and mortar gaming retailer - and more about a fight between Wall Street fund managers and individual investors organising online.
Short squeeze
Many Wall Street funds had taken short positions on the business, effectively seeking to profit on its share price falling.
The wallstreetbets followers responded with a "short squeeze", which involves pouring money into the company with the aim of pushing up the price.
If the price rises dramatically, short sellers incur losses and then need to cover their initial bets to avoid steeper losses.
A number of funds sold off share positions to pay for losses from shorting GameStop, contributing to a slide of more than 2 percent in Wall Street's main indexes.
Several platforms, including TD Ameritrade, Robinhood and E*Trade experienced outages as the number of retail trades soared amid interest in previously forgotten shares.
Ameritrade announced it will place "several restrictions" on GameStop and a number of other securities "out of an abundance of caution amid unprecedented market conditions and other factors".
The sudden surge of activity has led to some unusual activity elsewhere.
The Sydney Morning Herald reported that a tiny West Australian mining company saw a 50 percent surge in its share price, most likely due to its Australian stock exchange (ASX) code matching that of the American video game retailer.
A number of funds sold off share positions to pay for losses from shorting GameStop, contributing to a slide of more than 2 percent in Wall Street's main indexes. Photo: Kena Betancur / AFP
Regulators watching
The GameStop issue has also caught the attention of the White House and other officials.
Press secretary Jen Psaki said President Joe Biden's economic team, including newly-appointed Treasury Secretary Janet Yellen, was "monitoring the situation".
New US Treasury Secretary Janet Yellen is among those in the Biden administration keeping an eye on the performance of GameStop. Photo: Brendan Smialowski / AFP
US stock exchange Nasdaq's chief executive Adena Friedman said exchanges and regulators should watch whether anonymous social media posts could be driving "pump and dump" schemes.
"If we see a significant rise in the chatter on social media ... and we also match that up against unusual trading activity, we will potentially halt that stock to allow ourselves to investigate the situation," Friedman said on CNBC.
-BBC