Market swings and the surging prices of meme stocks have caught the attention of the U.S. Securities and Exchange Commission (SEC), Bloomberg reported on Monday (April 7). The SEC is doing a deep dive into the markets for evidence of manipulation and other improper behavior in light of escalating meme stocks like AMC and GameStop.
“SEC staff continues to monitor the market in light of the ongoing volatility in certain stocks to determine if there have been any disruptions of the market, manipulative trading or other misconduct,” the agency said, per Bloomberg. “In addition, we will act to protect retail investors if violations of federal securities laws are found.”
The SEC has already begun a probe into GameStop’s January rally, and is examining message boards to see whether traders used that route to encourage other investors to buy in, Bloomberg reported.
After two days of declines, AMC’s stock on Monday (June 7) started climbing again despite its lack of a sound financial foundation. Regulators are worried that investors could suffer steep losses if the stocks plunge, according to the report.
In Mid-May, meme traders chattering on social media were largely the cause of AMC’s five-day rally. On Twitter, #AMCSqueeze was trending, and there were some 133,000 Reddit posts about AMC. Based in Leawood, Kansas, AMC raised some $428 million by selling shares, AMC CEO Adam Aron tweeted on May 23. A January rally helped AMC shake off $600 million in debt through bond conversion.
Wall Street started taking a closer look at meme stocks this month, and some of the top brokers and bankers — including Goldman Sachs, Citigroup, Bank of America and Jefferies Financial Group — are tweaking their risk controls at prime-brokerage operations. Jefferies Prime Brokerage said it is no longer offering GameStop, AMC and MicroVision stock.