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Why BlackBerry Stock Just Crashed 20%

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

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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.

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