Tiffany Hagler-Geard | Bloomberg | Getty Images
GameStop’s shares rose 11% in pre-market trading on Wednesday, with the tightening in sales fueled by retail traders on Reddit appearing to recover after a sharp drop.
The stock had dropped more than 11% on Wednesday morning, but fell to black shortly after 5 am Eastern time.
Shares in the traditional video game retailer rose 1,625% in January and 400% last week, with traders led by the Reddit WallStreetBets segment accumulating shares.
But the momentum had eased earlier this week. Gamestop’s shares fell 60% on Tuesday and have lost more than 70% of their value since Friday.
AMC Entertainment, another heavily sold stock that was also targeted by Reddit traders, rose about 4% in pre-market trading.
Robinhood and other retail trade apps continue to limit some purchases from a collection of stocks pursued by the Reddit topic. Many Wall Street hedge funds started selling short positions at the end of last week, after suffering significant losses from the tightening.
Short selling is a strategy in which investors borrow shares of a stock at a certain price in the expectation that the market value will fall below that level when it comes time to pay for the borrowed shares. The repurchase of borrowed shares to close a short position, whether for profit or loss, is known as short hedging.