what happened
Shares of GameStop (NYSE: GME) shot up in the air on Thursday before comparing its profits. By the end of the trade, the video game retailer’s share price had risen 18.6% after more than doubling earlier in the day.
Approximately
When a chief financial officer suddenly leaves, it usually causes investors concern – and the company’s shares usually fall in value. However, GameStop does not trade anything like a typical stock.
GameStop’s shares have risen more than 140% since the announcement of the resignation of Jim Bell, CFO Jim Bell, after the market closed on Tuesday.
GameStop took investors on another wild ride on Thursday. Image Source: Getty Images.
It is unlikely that Bell’s departure will be the main cause of such a violent upward movement. More likely, Reddit’s army traders are launching a coordinated buying campaign in hopes of inflicting another brief push.
Now what
Wallstreetbets, a Reddit group with 9.3 million members, used similar tactics to fuel a rally at GameStop in January. The ensuing trading frenzy raised GameStop’s share price from $ 17.25 on January 4 to $ 483 on January 28.
So what is the problem? Now, as soon as the short press ended and Reddit’s traders switched to other stocks, GameStop fell below $ 40 a share by February 19th.
Unfortunately, this last round of wild trading in GameStop is also likely to end in tears for investors. The struggling retailer’s current share price is not supported by the underlying fundamentals of its business – and pumping and pouring schemes almost always end in disaster for unsuspecting shareholders.
For the vast majority of investors, this is the best way to stay away from the GameStop stock.
This article represents the opinion of the author, who may not be in agreement with the ‘official’ recommendation position of a Motley Fool premium advisory service. We are furry! Questioning an investment thesis – even one of our own – helps us all to think critically about investments and to make decisions that help us become smarter, happier and richer.