The GameStop Corp. logo on a smartphone and the Robinhood website on a laptop.
Tiffany Hagler-Geard | Bloomberg | Getty Images
GameStop, the poster child of a recent speculative trading frenzy, dipped below $ 50 apiece on Tuesday as the massive short squeeze took effect and investors made gains.
The physical video game seller fell 20% to $ 47.81 a share on Tuesday, after falling 80% last week due to its worst-ever weekly performance. At its all-time high on January 28, the stock went for $ 483 per share.
GameStop came into the spotlight two weeks ago when an army of private investors coordinating transactions on Reddit’s WallStreetBets forum pushed the stock up 400% in just a week. The short squeeze caused immense pain for hedge funds betting against GameStop, while the mania forced several online brokers to restrict trading on a slew of highly volatile names.
According to data from S3 Partners, GameStop short-term interest rates as a percentage of stocks available for trading fell to about 50% on Friday from over 130% two weeks ago. So most short bets are hedged and there is no significant power from short sellers to keep feeding the squeeze.
Trade volume also fell sharply this week as retail momentum slowed.
Some on Wall Street liken GameStop’s brief press to Volkswagen’s in 2008, when the German automaker briefly became the world’s largest company.
Other stocks that have seen increased speculative trading activity are also on the decline. AMC Entertainment is down 20% this week after falling 48% last week. Koss is down 11% this week and 68% the week before.
Wall Street heaved a sigh of relief as the frenzy within a handful of names turned out to be contained and seemed to have subsided. Many feared it could spill over into other parts of the market and have a greater negative impact on investor confidence.
“We know the financial conditions are favorable and investors have become more enthusiastic … But this doesn’t mean the stock market is in a speculative bubble,” said Kristina Hooper, Invesco’s chief strategist.
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