The stock price of GameStop fell on Tuesday, falling 60% to $ 90 per share. The drop signaled that the popular WallStreetBets stock market discussion forum Reddit – a major force behind last week’s spectacular rally in the troubled actions of the video game retailer and others – could lose its magic to move the market.
The GameStop has followed a significant reduction in short interest on shares, which measures how many shares of the company have been borrowed to sell them. 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.
“These things can take longer than people expect, but when they relax, they can relax pretty quickly,” said Ross Mayfield, an investment strategist at Baird. “When there will be mania for complete speculation and gambling, someone will be allowed to hold the bag.”
The decline, which was followed by a sharp drop in GameStop shares on Monday, could also lead to significant losses for some of the individual investors who followed the positive stock market suggestions posted. WallStreetBets. The forum has grown in popularity in the last week, growing to 8 million members. GameStop shares hit a record high of $ 483 on Thursday.
Since then, the price of GameStop shares has dropped by 81% in less than a week. This wiped out nearly $ 29 billion from the company’s stock market value, which at its peak last week had a market capitalization of $ 35 billion. On Tuesday, the market value fell to 6.3 billion dollars.
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 40 percent on Tuesday to just under $ 8 each. Those shares had been up to $ 20 last week. Shares of BlackBerry, which had reached $ 28 last week, fell 21 percent to $ 11.50 on Tuesday, while Koss fell 43 percent.
The current chairman of the U.S. Securities and Exchange Commission, Allison Herren Lee, told NPR on Monday that the stock market regulator is looking at various aspects of the sharp rise in GameStop shares, including whether brokers have acted properly and whether they have there was some 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.
Naked Brand Group, which sells underwear for both men and women, announced Monday that it has sold more than 29 million shares in a subsequent bid for $ 1.70 each, raising $ 50 million for 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 91 cents each, a 45% drop from Monday’s bid price. A Naked Brand spokesman did not return a request from CBS MoneyWatch for comment.
—The Associated Press contributed to this report.