The GameStop Corp logo. on a smartphone and Robinhood’s website on a laptop.
Tiffany Hagler-Geard | Bloomberg | Getty Images
GameStop, the poster boy for a recent speculative frenzy in the retail market, fell to less than $ 50 each on Tuesday, when the massive squeeze began to take effect and investors posted profits.
The traditional video game retailer fell 20% to $ 47.81 a share on Tuesday, after falling 80% last week to its worst weekly performance of all time. At its highest point on January 28th, the stock was going for $ 483 each.
GameStop gained prominence two weeks ago when an army of retail investors who coordinated negotiations on Reddit’s WallStreetBets forum pushed shares to 400% in just one week. The slight pressure brought great pain to the hedge funds that were betting against GameStop, while the craze forced several online brokers to limit trading on a range of highly volatile names.
The share sold on GameStop as a percentage of shares available for trading fell to around 50% on Friday, from more than 130% two weeks ago, according to data from S3 Partners. Therefore, most of the short bets have been covered and there is no significant strength from short sellers to continue feeding the squeeze.
Turnover has also dropped dramatically this week, with the retail slowdown.
Some on Wall Street compare GameStop’s little pressure with that of Volkswagen in 2008, when the German automaker briefly became the world’s largest company.
Other actions that have seen speculative commercial activities increased are also coming apart. AMC Entertainment fell 20% this week after a 48% decline last week. Koss fell 11% this week and 68% the week before.
Wall Street breathed a sigh of relief when the frenzy ended up being limited to a handful of names and appeared to have died. Many feared that this could spread to other areas of the market and have a more negative impact on investor confidence.
“We know that financial conditions are favorable and investors have become more enthusiastic … But that does not mean that the stock market is in a speculative bubble,” said Invesco’s chief global market strategist Kristina Hooper.
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