GameStop shares tanked over 42 percent Thursday as the Reddit-fueled frenzy began cooling. The price drop came even as Robinhood and other brokers reversed their trading limits on the stock.
GameStop has lost over 80 percent of its rally this week as the investors dropped the stock for their current favourites, pharma stocks.
GameStop stock had soared over 1600 percent in January, in what was an eye-popping rally, despite its shaky financials. The rally began when a group of Reddit upstarts joined forces against institutional hedge fund managers who were betting on a decline. But the social media campaign initiated a short squeeze, sending the managers scurrying to cover their positions.
These things may last longer than people expect, but when they unwind, they can unwind pretty fast, said Ross Mayfield, investment strategist at Baird. When its complete speculation mania and gambling, someone is going to be left holding the bag.
However, even this attention-grabbing rally did not send the shoppers back to GameStop stores. The offline video game retailer logged a decline in customer traffic in January. GameStop's new board member Ryan Cohen, the founder of online pet store Chewy, did raise hopes of a turnaround, but it's still going to be an uphill battle.
However, the wild swings in the stock have drawn the attention of financial regulators. Newly-elected US Treasury Secretary, Janet Yellen has called a meeting of top officials from the Securities and Exchange Commission and the Federal Reserve, to discuss the ongoing market volatility.
With inputs from agencies
(Edited by : Abhishek Jha)
First Published: Feb 5, 2021 5:58 PM IST
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