GameStop plunges as much as 60% after Robinhood curbs trading on wildly volatile morning

• GameStop slumped as much as 60% in highly volatile morning trading.
• The fall came after Robinhood and others curbed trading in GameStop stock and options.
• Trading in AMC, Bed Bath & Beyond, Nokia and others was also limited.

The GameStop stock price plunged as much as 60% on Thursday despite rising in early trading, after Robinhood and other platforms restricted trading in the video game shop's shares and other popular securities such as AMC.

GameStop was down 29.86% to $247.91 per share at 11.45am ET after recovering from steeper falls. It had been a highly volatile morning, with the stock opening lower before rising more than 30% and then tumbling again.

A battle between hedge funds who had been shorting the company's shares and day traders on the Wall Street Bets internet forum on Wednesday pushed the GameStop stock price up 134.84% to $347.51. GameStop stock has risen around 400% in the last 5 days.

Day traders, organizing their efforts on Reddit and alternative platform Discord, also drove up the prices of heavily-shorted stocks such as cinema chain AMC, hammering short-sellers. The resulting "loss porn" had caused glee among Wall Street Bets members.

Read More: 'We're very surprised we didn't underperform in the 4th quarter': Cathie Wood and her analysts break down their stock-selection process and the top 10 picks that contributed to the outperformance of ARK ETFs in Q4 2020

Other Wall Street Bets targets - many of which have been heavily shorted by hedge funds - also dropped sharply on Thursday. AMC was down around 60% while Bed Bath & Beyond fell around 40%. A short position is a bet that stock will fall.

Redditors' favourite stocks tanked after popular trading platform Robinhood curbed transactions in GameStop and others such as AMC, BlackBerry, Bed Bath & Beyond and Nokia.

The discount brokerage informed clients they can only close their positions but not buy new shares. Robinhood said it was doing so "in light of recent volatility".

Members of Reddit's Wall Street Bets forum were outraged that trading in their favourite stocks had been curtailed, with one popular post calling it "market manipulation".

Read More: A Wall Street firm tweaked the Shiller PE ratio to create a superior gauge of the strongest stock-market returns - and broke down why the beloved metric won't cut it anymore

Some analysts noted that the GameStop debacle had knocked wider market confidence, combining with worries over vaccines and the economy to send stocks tumbling on Wednesday.

David Madden, chief market analyst at trading platform CMC Markets, on Thursday said the controversial move by Robinhood and others had calmed wider market nerves.

"Sentiment in equities has since improved as those worries in relation to hedge funds have faded," he said. "[It] has helped bring down the fear factor as the battle won't be as intense now."