Ramin Talaie | Bloomberg | Getty Images
GameStop skyrocketed again, reaching $ 450 apiece on Thursday, with retail momentum driven by Reddit continuing to heat up.
The shares of the traditional video game retailer reversed losses in the overnight trade, with the latest jump of 31%, to $ 451.10 in the pre-market. The move followed a 130% rise on Wednesday in large volume, pushing its weekly earnings to 466%. The stock was worth about $ 40 just a week ago.
GameStop has been a staunch target in Reddit’s “Wallstreetbets” chat room, where an army of in-house retail investors have come together to push stocks up and squeeze short selling hedge funds. The forum, which now has more than four million members, was briefly private on Wednesday night, while moderators said they were “unable to enforce Reddit’s content policy”.
A trend post on Thursday said “don’t be afraid of the drop in $ GME $ BB. Hedge funds trade after hours to scare you all … CONTINUE SHOPPING AND MAINTAINING”. The post quickly drew over 1,000 comments in an hour.
Another important post in the community said “buy expensive, never sell”, with a photo from GameStop.
Some passionate Reddit users have shared screenshots of their brokerage accounts, showing monstrous returns from trading on GameStop and other names.
“The stock in GameStop’s stock is a game of musical chairs and my advice to investors is to sell before the music stops,” said David Trainer, CEO of New Constructs. “As fickle as the crowd of traders may have been in selecting GameStop as one of their favorite stocks, they can be as unstable as when to drop the stock.”
The Reddit audience has begun to target other strongly shortened names, including Bed Bath & Beyond and AMC Entertainment.
AMC soared 300% on Wednesday alone, bringing its weekly high to over 450%. In the previous session, more than a billion shares changed hands at AMC, marking its highest-volume day ever. Bed Bath & Beyond is also up 75% this week. The pair fell slightly in pre-market trading on Thursday.
The extreme speculative behavior among novice investors is unnerving many on Wall Street, as the increasing losses of hedge funds may spread to other areas of the market. Some also believe that this buying frenzy may undermine general market confidence and destabilize conditions.
The S&P 500 and Dow Jones Industrial Average suffered their biggest loss since October on Wednesday, as concerns about the craze deepened.
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