Please ensure Javascript is enabled for purposes of website accessibility

Why BlackBerry Stock Just Crashed 20%

By Rich Smith - Feb 2, 2021 at 11:21AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Robinhood trading restrictions sap the short squeeze's strength.

What happened

BlackBerry (BB -2.16%) stock tanked 20% in 10:30 a.m. EST trading today.

One of the primary beneficiaries of WallStreetBets-infused investor enthusiasm last week, BlackBerry stock now appears to be crashing as investors, who bought the stock with abandon last week in a short squeeze, move on in search of easier prey.

Simple red arrow declining stock chart on a white checked background

Image source: Getty Images.

So what

BlackBerry stock sits on a list of eight specific stocks currently restricted for trading on the popular Robinhood stock trading app. Robinhood states that its customers are currently not permitted to buy new shares of BlackBerry if they own 700 or more shares, nor buy new option contracts if they own more than 700 such contracts. Robinhood customers are permitted to sell their shares if they own more than the limit, however.  

Still, limiting customers' ability to buy the stock, while placing no corresponding limits on selling, tends to bias the stock price in a downward direction -- as we're seeing happen today.

Now what

Yesterday, Robinhood announced that it has secured $3.4 billion in financing "to invest in record customer growth, including $1 billion in funding announced on January 29." The company had previously explained that it imposed trading restrictions in the first place because it lacked the cash to meet "deposit requirements" imposed by its securities clearinghouse.  

Assuming the cash infusion suffices to meet the company's deposit requirements, it's possible that Robinhood could be preparing to lift, or at least ease, its trading restrictions on BlackBerry stock -- at which point, the WallStreetBets phenomenon that we saw last week could start all over again.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

BlackBerry Stock Quote
BlackBerry
BB
$5.88 (-2.16%) $0.13

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
349%
 
S&P 500 Returns
122%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/19/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.