GameStop share frenzy stopped in its tracks as value plunges 50%

Shares targeted by armchair investors to inflict losses on hedge funds this year have fallen sharply in a sign the activism may have peaked.

The market value of GameStop – a struggling US gaming retailer – plunged by up to 50% on Tuesday to roughly $105 a share amid a rollercoaster ride for the stock in the past few weeks.

It was the first company to benefit from a surge in interest, co-ordinated by users of a forum on Reddit, that culminated in shares nearing $500 each last month from a lowly $20.

Image:The chart indicates closing prices for the volatile stock rather than intraday movements

The market move on GameStop inflicted heavy losses on hedge funds and other so-called short-sellers – those betting that the share price will fall – and was seen as a challenge to the Wall Street establishment.

The frenzy has been made easier by the surge in popularity in zero-commission trading platforms during the coronavirus crisis – apps, such as Robinhood, that have been forced to raise money and latterly restrict trading to meet the demands placed on their operations.

AMC Entertainment, another of the stocks to have benefited from the unprecedented activity of the past fortnight, was 40% down at one stage on Tuesday.

BlackBerry and Bed Bath & Beyond also showed double-digit declines.

More from Gamestop

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  • GameStop: The competing forces trading blows over lowly gaming retailer

  • GameStop share frenzy starts again as platforms ease restrictions

  • Reddit forum’s role in Gamestop shares frenzy faces regulatory probe

  • Short-sellers burned as small investors pile into Gamestop options

Paul Nolte, portfolio manager at Kingsview Asset Management in Chicago, said of the market movements: “The rally is likely over (since) the short positions are pretty well taken care of.

“That’s the game you play when you do this thing. It can work for a while until it stops working and when it stops working, it reverses pretty quickly.”

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Real Wolf of Wall Street on GameStop stock chaos

Spot silver prices, a commodity to have been caught up in the fad, fell more than 7% after hitting an eight-year high on Monday.

Traders said big tech firms were the largest winners on Tuesday, as Google‘s parent Alphabet and Amazon prepared to deliver earnings statements after the market close.

Uber rose 7% after the company said it would buy alcoholic drink delivery service Drizly for $1.1bn.

Mark Gibson

Graduates in Northwestern University, Evanston, Illinois 1990. Move to Los Angeles California in 2004. Specialized in Internet journalism.

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