GameStop shares plunged 60% Tuesday, cleaving off more of the stock’s recent blockbuster gains following a social-media led campaign to get it to skyrocket at the expense of big Wall Street funds.
Shares were down to about $90 apiece at market close, following a 31% decline a day earlier. The stock closed out January at $325 a share, far above the $17 it fetched at the beginning of the year.
The pullback is the latest example of the extreme volatility that’s marked GameStop’s meteoric run. Last week a 44% drop on Thursday was followed by a 68% jump Friday. The extreme moves have been driven by a frenzy of speculative trading and appear to have little to do with the actual prospects of the company, which has been losing money consistently.
The business model of the mall-based retailer of physical copies of video games has taken a beating as fewer people go out shopping in malls and as more people download video games instead of buying them in stores.
Investors on Reddit and other social media portals have banded together in recent weeks to snap up shares of GameStop, AMC and other struggling chains, stocks that several Wall Street hedge funds had bet would fall. Some of those hedge funds have now admitted defeat and walked away from those bets in a stunning reversal of financial power on Wall Street.
The number of GameStop shares that have been shorted (bets that the stock will fall), were slashed by more than half in recent days, according to a report Monday by the analytics firm S3 Partners.
Shares in some stocks that have also been hyped by some traders on Reddit were also down Tuesday. The S&P 500 index, meanwhile, rose 1.4%.
Follow @ChiTribBusiness on Facebook and @ChiTribBiz on Twitter.