Shares of GameStop and AMC Entertainment soared for a fourth day on Wednesday, forcing hedge funds to pull back from heavy losses and calls for an investigation into a social media-driven delusion.
Short seller Citron, a target for some individual traders who made big gains for a number of niche stocks on Wall Street over the past week, said in a video message that he had dropped his bet on the decline in GameStop shares.
With commentators and advocates investigating the moves, Nasdaq chief Adena Friedman said exchanges and regulators need to address the potential for ‘pump and dump schemes’ being driven on social media.
Some on Wall Street wonder if months’ overall earnings have driven shares in bubble territory.
The Securities and Exchange Commission declined to comment.
Mainstream commentators have been questioning the justification for the shifts in a number of strong stocks in recent times, at a time when some on Wall Street are wondering if months’ stars have driven overall earnings shares in bubble territory.
GameStop’s share has risen nearly 700 percent over the past two weeks, raising the struggling video retailer’s market value from $ 1.24 billion to more than $ 10 billion. BlackBerry is up 185 percent and is on course for its best month ever.
Together with AMC and Nokia Oyj, the two were once again one of the heaviest traded in pre-market transactions, with Reddit discussion threads chatting again about the shares.
“These are not normal times and although the thing (Reddit) … is fascinating to watch, I can not help but think that it will probably not end well for anyone,” said Jim Reid, strategist of Deutsche Bank, said.
The rise of easy access to programs like Robinhood that enable ordinary Americans to trade in stock markets with almost no initial cost has spurred a surge in direct investment over the past year as the billion-dollar official stimulus drives markets higher.
At GameStop, the retailer spoke out against some of the institutional short sellers – a traditional hedge fund area – that fall into companies that they consider poorly promoted and bet on.
Overall, GameStop short sellers fell $ 5 billion in 2021 on a net funding basis, which included $ 876 million in losses earlier Tuesday, according to analytics firm S3 Partners.
Barron’s reported Tuesday that the leading securities regulator in Massachusetts believes that trading in GameStop shares indicates that there is something “systematically wrong” with the options trading around the stock.
Others say that the investments should ultimately determine the investors who make them at the end of the day.
“The SEC investigated Robinhood earlier, but if you have a structure in place that makes the zero-cost trading platforms work, how do you stop the flow?” says Neil Campling, head of technology media and telecommunications research at Mirabaud Securities.
Trading in GameStop shares was halted nine times on Monday and five times on Tuesday due to volatility.