GameStop’s share price rallied on Wednesday and fell back above $ 100, but then fell in the last hour of trading to close the day by just 3% from Tuesday, well below recent highs. The faltering share price also suggests that the popular WallStreetBets Reddit discussion board that helped drive the run-up may lose its magic to move the market.
The GameStop tumble followed a major reduction in short-term interest on the stock, which measures how much of the company’s shares were borrowed to sell. Many pointed to the previously high level of short-term interest rates, and the fact that hedge funds and others betting on the video game retailer were under pressure due to the fact that GameStop’s shares had soared.
GameStop shares ended Wednesday at just over $ 92 each, rising 3% a day. The share price was only as high as $ 483 last Thursday – a dip of more than 80% in less than a week.
“These things can last longer than people expect, but when they relax, they can relax fairly quickly,” said Ross Mayfield, investment strategist at Baird. “If it’s a complete speculation of mania and gambling, there’s going to be someone left holding the bag.”
The decline in GameStop shares, which fell by 60% on Tuesday alone, could lead to significant losses for some of the individual investors who made the positive proposals on the stock market. WallStreetBets. The forum has grown in popularity over the past week, increasing to 8 million members. GameStop shares peaked at $ 483 on Thursday amid social media chants of buy, buy, buy.
Since then, GameStop’s 81% share price dip has wiped out nearly $ 29 billion in the company’s stock market value, which peaked at $ 35 billion last week. On Tuesday, the stock market value, or market capitalization, fell to $ 6.3 billion.
The share prices of other companies that received significant mention in WallStreetBets recovered slightly on Wednesday, after falling sharply the previous day.
Shares of film chain AMC Entertainment rose more than 10% on Wednesday to just under $ 9. The share, which fell 40% on Tuesday, was up to $ 20 last week. climbed, ending Wednesday, after a slight setback, at $ 12.
The acting chairman of the US Securities and Exchange Commission, Allison Herren Lee, told NPR on Monday that the stock market regulator is investigating various aspects of the sudden rise in GameStop shares, including whether brokers acted and whether there was any market manipulation. . She also warned against companies wanting to raise money by selling shares at prices that are apparently inflated by social media-driven traders and that are not sustainable.
CBS MoneyWatch reported On Monday, the moderators of the WallStreetBets discussion board recently tracked down a “large amount” of bot activity in the content of the stock recommendation posted in its group.
Naked Brand Group, which sells intimate clothing for men and women, announced on Monday that it had sold more than 29 million shares in a $ 1.70 follow-on offer, raising $ 50 million for the company. The company, based in Auckland, New Zealand, is closing all its stores in favor of online sales.
Naked Brand’s shares traded just 7 cents as recently as November. In its listing document, filed with the SEC, the company said the share price has experienced extreme volatility over the past few weeks. It is said that the price fluctuations appear to be driven by chats on social media, as well as a “short interest” in the company, as well as other factors.
On Tuesday, Naked Brand shares fell to 91 cents each, down 45% from the offer price on Monday. A Naked Brand spokesman did not return a request from CBS MoneyWatch for comment.
—The Associated Press contributed to this report.