GameStop Corp. on a smartphone and the Robinhood website on a laptop computer.
Tiffany Hagler-Geard | Bloomberg | Getty Images
GameStop, the poster child for a recent speculative retail frenzy, collapsed below $ 50 a piece on Tuesday as the short-lived massive tightening took effect and investors made profits.
The brick-and-mortar video game retailer fell 20 percent to $ 47.81 a share on Tuesday, after falling 80 percent last week for its worst weekly performance. At its all-time high on Jan. 28, the stock was at $ 483 a share.
GameStop came to the fore two weeks ago, when an army of retail investors who coordinated transactions on Reddit’s WallStreetBets forum increased its stock by 400% in just one week. The short spill caused huge pain on hedge funds that bet against GameStop, while the rage forced several online brokers to limit trading in a number of highly volatile names.
The drop in interest on GameStop as a percentage of shares available for trading fell to about 50% on Friday from over 130% two weeks ago, according to data from S3 Partners. Therefore, most short bets have been covered and there is no significant force from short sellers to continue to fuel the stress.
The volume of transactions fell sharply this week as the pace of retail sales slowed.
Some on Wall Street compare GameStop’s brief pressure to that of Volkswagen in 2008, when the German carmaker briefly became the largest company in the world.
Other stocks that have seen increased speculative trading are also disturbing. AMC Entertainment fell 20 percent this week after a 48 percent decline last week. Koss was down 11% this week and 68% the week before.
Wall Street breathed a sigh of relief when the frenzy turned out to be limited to a handful of names and seemed to be gone. Many were concerned that it could spread to other areas of the market and have a more negative impact on investor confidence.
“We know the financial conditions are supportive and investors have become more enthusiastic … But that doesn’t mean the stock market is in a speculative bubble,” said Kristina Hooper, Invesco’s global market strategist.
Subscribe to CNBC PRO for exclusive statistics and analysis, and live scheduling on weekdays around the world.