GameStop’s share price crashed Tuesday, up 60% to $ 90 a share. The decline indicated that the popular WallStreetBets Reddit stock market discussion board – a key player behind the spectacular rally in the turbulent shares of the video game and others – may be losing 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 short-term interest rates, and the fact that hedge funds and others betting on the video game retailer were under pressure due to GameStop’s shares.
“These things can take longer than people expect, but if 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, which followed a sharp drop in GameStop shares on Monday, could also 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.
Since then, GameStop’s share price has dropped 81% in less than a week. It wiped out nearly $ 29 billion in the company’s stock market value, which peaked at $ 35 billion last week. The market value fell to $ 6.3 billion on Tuesday.
The share prices of other companies that rejoiced in WallStreetBets also fell sharply. Shares of movie theater chain AMC Entertainment also fell 40% on Tuesday to just under $ 8 each. The stock was as high as $ 20 last week. BlackBerry’s shares, which were as high as $ 28 last week, fell 21% to $ 11.50 on Tuesday, while Koss fell 43%.
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 driven by social 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.
Shares of Naked Brand traded just 7 cents until 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.