Ramin Talaie | Bloomberg | Getty Images
GameStop rose again, exceeding $ 450 on the premarket on Thursday, as the retail momentum driven by Reddit continued to warm.
Shares of the brick-and-mortar video game retailer reversed overnight trading losses, the latter jumping 31% to $ 451.10 in premarket trading. The movement on Wednesday followed a rally of over 130%, in large volume, leading to its weekly gains of up to 466%. The stock was worth about $ 40 just a week ago.
GameStop was a hot target in the Reddit chat room “Wallstreetbets”, where an army of home retail investors came together to push stocks higher and eliminate short-selling hedge funds. The forum, which now has more than four million members, went private on Wednesday night, as moderators said they were “unable to ensure Reddit’s content policy.”
A trendy post said on Thursday that “don’t be afraid of the BBE $ USD drop. Hedging funds are traded after hours to scare you all … CONTINUE BUYING AND HOLDING ”. The post quickly attracted over 1,000 comments in one hour.
Another top post in the community said “buy big, never sell” with a GameStop photo.
Some of Reddit’s passionate users shared screenshots of their brokerage accounts, showing monstrous profits from trading in GameStop and other names.
“The stock in GameStop is a game of music chairs and my advice to investors is to sell before the music stops,” said David Trainer, CEO of New Constructs. “As volatile as the GameStop selection was as one of their favorite stocks, they could be just as volatile as they let the stock fall.”
The Reddit crowd started targeting other very short names, including Bed Bath & Beyond and AMC Entertainment.
AMC rose 300% on Wednesday alone, bringing the weekly rally to over 450%. In the previous session, more than a billion shares changed hands in AMC, marking the day with the highest volume of all time. Bed Bath & Beyond also rose 75% this week. The duo fell slightly in premarket trading on Thursday.
Extremely speculative behavior among start-up investors bothers Wall Street, as rising hedge fund losses could spill over into other areas of the market. Some also believe that this buying frenzy could affect overall market confidence and destabilize conditions.
The S&P 500 and the Dow Jones industrial average suffered their biggest loss since October on Wednesday, as worries about mania deepened.
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