GameStop’s stock price plummeted on Tuesday, falling more than 50%, to about $ 110 per share. The fall also signaled that the popular stock market discussion forum WallStreetBets Reddit – a major force behind last week’s spectacular rebound in the stocks of video game and other retailers – may be losing its magic to move the market.
GameStop’s downturn followed a sharp reduction in short interest on the shares, which measures how many shares of the company were loaned to sell. Many had pointed to the high interest previously uncovered and the fact that hedge funds and others that were betting against the video game retailer were squeezed as the reason for the GameStop stock skyrocketing.
The decline could also result in significant losses for some of the individual investors who took advantage of the positive stock market suggestions posted on the WallStreetBets, which grew in popularity last week to 8 million members. GameStop shares reached a historic high of $ 483 on Thursday.
These stocks have already dropped 77% to $ 110 in less than a week. That wiped out nearly $ 27 billion in GameStop’s stock market value, which at its peak last week has a market capitalization of $ 35 billion. As of Tuesday, the market value had dropped to $ 8 billion.
The stock prices of other companies that received stimulating mentions on WallStreetBets also fell sharply. Shares in the AMC Entertainment movie network also fell about 50% on Tuesday, to around $ 6.50 each. These shares reached $ 20 last week. BlackBerry shares, which reached $ 28 last week, also fell on Tuesday to $ 11.
On Monday, acting chairman of the United States Securities and Exchange Commission, Allison Herren Lee, told NPR that the stock market regulator was examining different aspects of the sudden increase in GameStop’s shares, including whether brokers acted properly and if there was any market manipulation. She also warned against companies trying to raise money by selling shares at prices that appeared to be inflated by social media traders and were not sustainable.
CBS MoneyWatch reported on Monday that WallStreetBets discussion forum moderators recently detected a “large amount” of bot activity in the stock recommendation content being posted to their group.
And on Monday, the Naked Brand Group, which sells underwear for men and women, announced that it had sold more than 29 million shares in a subsequent offer of $ 1.70 each, raising $ 50 million for the company. The company, based in Auckland, New Zealand, is closing all of its stores in favor of online sales.
Naked Brand’s shares were trading at just 7 cents each until November. In its offering document, filed with the SEC, the company said its share price had experienced “extreme volatility” in recent weeks. The company said that price fluctuations appear to be driven by conversations on social media, as well as “short-term interest” in the company, in addition to other factors.
On Tuesday, Naked Brand shares fell to 94 cents each, a 45% drop from Monday’s offer price. A Naked Brand spokesman did not return a request from CBS MoneyWatch for comment.