GameStop’s stock price contracted on Tuesday, falling 60% to $ 90 a share. The drop indicated that the popular WallStreetBets Reddit stock market discussion board – a major force behind last week’s spectacular rally in the troubled video game stocks and others’ – may be losing its magic to move the market.
The GameStop fall followed a major cut in the short-term interest rate on the stock, which measures how much of the company’s stock has been borrowed to sell. Many had pointed to that previously high short-term interest rate, and the fact that hedge funds and others betting against the video game retailer had been pressured as one reason why GameStop’s stock had soared.
“These things can take longer than people expect, but when they settle down, they can settle down pretty quickly,” said Ross Mayfield, investment strategist at Baird. “If it’s complete speculation mania and gambling, someone will hold the bag.”
The fall, which followed a sharp drop in GameStop shares on Monday, may also result in significant losses for some of the individual investors who have seen the positive stock market suggestions. WallStreetBets. The forum has skyrocketed in popularity over the past week, reaching 8 million members. Shares of GameStop hit a record high of $ 483 on Thursday.
Since then, GameStop’s stock price has fallen 81% in less than a week. That erased nearly $ 29 billion in stock market capitalization from the company, which had a market cap of $ 35 billion at its peak last week. On Tuesday, that market value fell to $ 6.3 billion.
Share prices of other companies boosted in WallStreetBets have also fallen sharply. Shares of movie theater chain AMC Entertainment also fell 40% on Tuesday to just under $ 8 each. That stock was at $ 20 last week. Shares of BlackBerry, which were still at $ 28 last week, fell 21% to $ 11.50 on Tuesday, while Koss fell 43%.
Acting Chairman of the United States Securities and Exchange Commission, Allison Herren Lee, told NPR on Monday that the stock market regulator is investigating various aspects of the sudden surge in GameStop stock, including whether brokers have traded correctly and whether any market manipulation has taken place . . She also warned against companies trying to raise money by selling stock at prices that seemed too high by social media-driven traders and were unsustainable.
CBS MoneyWatch reported on Monday that the moderators of the WallStreetBets discussion forum recently detected a “large amount” of bot activity in the stock recommendation content posted to the group.
Naked Brand Group, which sells intimate apparel for both men and women, announced on Monday that it had sold more than 29 million shares in a follow-up offering for $ 1.70 each, raising $ 50 million for the company. The company, which is based in Auckland, New Zealand, is in the process of closing all of its stores in favor of online sales.
Naked Brand’s shares had only traded for just 7 cents each in November. In its offering document, filed with the SEC, the company said its stock price had seen “extreme volatility” in recent weeks. It said the price swings appeared to be caused by social media chatter and “short interest” in the company, as well as other factors.
On Tuesday, shares of Naked Brand fell to 91 cents each, down 45% from Monday’s bid price. A Naked Brand spokesperson did not return a request from CBS MoneyWatch for comment.
—The Associated Press contributed to this report.