Photographer: David Paul Morris / Bloomberg
Photographer: David Paul Morris / Bloomberg
GameStop Corp. ‘s spectacular rally on Tuesday continued to pull off other recent favorites from Reddit speculators, after clumsy investors appeared to have reduced their positions and trading volume.
Shares of the video game retailer fell 28% at 4:03 a.m. to $ 162 in pre-trading in New York. This reduced its annual return to 760%. AMC Entertainment Holdings Inc. decreased by 14% compared to the last closure in the US.
GameStop tumbled for the second time in three sessions on Monday as trading volume declined to about a third of the amount of the past five sessions after the sharp rise last week. According to data from financial analysis firm S3 Partners, the discount fell to 53% of the available shares, from more than 140% just last month.
Read more: GameStop a short interest in a sign that covers traders
“Even if short-term interest rates are solid, the fading momentum could prevent another major move to the upside,” Swissquote senior analyst Ipek Ozkardeskaya said in a written comment. “On the other hand, a shortage of GameStop shares will require very strong nerves, which will prevent the stock from falling more than necessary.”
Restrictions on the amount of shares investors can buy using the popular trading app Robinhood Markets Inc. are likely to keep retailers afloat. The platform eased restrictions Monday afternoon to allow users to buy a limit of 20 shares of GameStop. This is higher than the limit of one share before the market opened.
Short Seller Setback
The lower number of shares sold short can also hurt the day traders’ thesis that a higher share price will only lead to more profits, as hedge funds that have to cover their shorts against the company Grapevine, Texas.
Backlash against short sellers, including Citron Research, was a major rallying point for retailers using Reddit to communicate about their commitment. The mania has spread to companies like AMC Entertainment, which saw record volatility last week as trading volumes rose.
“The recent rally with all these names has had all the symptoms and similarities with a major inefficiency caused by excess short-circuiting compared to the free movement of companies and excess liquidity,” said Alberto Tocchio, a portfolio manager at Kairos Partners, said. “The rise of the Reddit factor is something we are going to be in the future. It is an additional factor that all hedge fund managers have to deal with.”
– With help by Ksenia Galouchko
(Updates to US Commerce Market)