GameStop’s stock price gyrated on Wednesday, climbing back above $100, but then slumping in the last hour of trading to end the day up just 3% from Tuesday, and well below its recent highs. The wavering stock price also suggests the popular WallStreetBets Reddit discussion board that has helped drive the run-up may be losing its magic to move the market.
The GameStop tumble followed a large reduction in short interest on the stock, which measures how many of the company’s shares have been borrowed to sell. Many had pointed to that previously high level of short interest, and the fact that hedge funds and others betting against the video game retailer had been squeezed, as a reason GameStop’s shares had soared.
GameStop shares ended Wednesday at just over $92 each, up 3% for the day. The stock price had been as high as $483 only last Thursday — a plunge of more than 80% in less than a week.
“These things can last longer than people expect, but when they unwind they can unwind pretty fast,” said Ross Mayfield, investment strategist at Baird. “When it’s complete speculation mania and gambling, someone is going to be left holding the bag.”
The drop in GameStop shares, which fell 60% on Tuesday alone, could result in significant losses for some of the individual investors who had ridden the positive stock market suggestions posted on WallStreetBets. The forum has soared in popularity in the past week, swelling to 8 million members. GameStop’s shares hit an all-time high of $483 on Thursday amid social media chants of buy, buy, buy.
Since then, GameStop’s 81% stock-price dive has erased nearly $29 billion in the company’s stock-market value, which at its height last week was $35 billion. On Tuesday that stock market value, or market capitalization, sank to $6.3 billion.
The share prices of other companies that have gotten boosterish mentions in WallStreetBets rebounded slightly on Wednesday, after suffering steep drops the day before.
Shares of movie theater chain AMC Entertainment rose more than 10% to just under $9 on Wednesday. That stock, which fell 40% on Tuesday, had been as high as $20 last week. BlackBerry’s shares, which had climbed to $28 last week, ended Wednesday, after a slight rebound, at $12.
The acting chairwoman of the U.S. Securities and Exchange Commission, Allison Herren Lee, told NPR on Monday that the stock market regulator is looking into different aspects of the sudden rise in GameStop shares, including whether brokers acted appropriately and whether there had been any market manipulation. She also warned against companies trying to raise money by selling shares at prices that seemed to be inflated by social media driven traders and were not sustainable.