The stock price of GameStop fell on Tuesday, falling by more than 50% to about $ 110 per share. The drop also signaled that the popular WallStreetBets Reddit stock market discussion forum – a major force behind last week’s spectacular rally in video game and other retail actions – could lose its magic to move the market .
The decline in GameStop followed a significant reduction in short-term interest on shares, which measures how many shares of the company were borrowed to be sold. Many have pointed out this previously high interest and the fact that hedge funds and others betting against the video game retailer have been squeezed, which is why GameStop shares have risen.
The decline could also lead to significant losses for some of the individual investors who followed the positive suggestions on the stock market. WallStreetBets, which has grown in popularity in the last week to 8 million members. GameStop shares hit a record high of $ 483 on Thursday.
These shares have now fallen 77% to $ 110 in less than a week. This wiped out the market value of nearly $ 27 billion for GameStop, which at its peak last week has a market capitalization of $ 35 billion. On Tuesday, the market value fell to $ 8 billion.
The stock prices of other companies that received extensive mentions in WallStreetBets also suffered sharp declines. Shares of the AMC Entertainment movie chain also fell about 50 percent on Tuesday to about $ 6.50 each. Those shares had been up to $ 20 last week. BlackBerry shares, which had reached $ 28 last week, also fell to $ 11 on Tuesday.
On Monday, the interim chairman of the U.S. Securities and Exchange Commission, Allison Herren Lee, told NPR that the stock market regulator is looking at various aspects of the sharp rise in GameStop shares, including whether brokers have acted properly and there was market manipulation. She also warned against companies trying to raise money by selling shares at prices that seemed inflated by social media-driven traders that were unsustainable.
CBS MoneyWatch reported Monday, that the moderators of the WallStreetBets discussion committee recently detected a “large amount” of bot activity in the content of stock recommendations that was posted in his group.
And on Monday, Naked Brand Group, which sells underwear for both men and women, announced that it had sold more than 29 million shares in a subsequent bid for $ 1.70 each, raising $ 50 million. dollars for the company. The company, based in Auckland, New Zealand, is closing all its stores in favor of online sales.
Naked Brand shares traded at just 7 cents each in November. In its bid document, submitted to the SEC, the company said its share price had experienced “extreme volatility” in recent weeks. He said that price fluctuations seem to be caused by discussions on social networks, as well as the “short interest” in the company, as well as other factors.
On Tuesday, Naked Brand shares fell to 94 cents each, a 45% drop from Monday’s bid price. A Naked Brand spokesman did not return a request from CBS MoneyWatch for comment.