GameStop shares tumble just as meme stock passes $300
Shares in GameStop have tumbled back to $242, after rising to more than $300 per share earlier today, nearing their all-time high.
The latest GameStop rally is said to be based on company fundamentals and speculation that small investors will pour their stimulus packages into markets.
After a strong few days the stock has dropped in the last hour, tumbling to $242, down 1.7 per cent since the market opened.
Other stocks popular with retail investors also saw wild swings, with cinema operator AMC Entertainment rising nearly 19 per cent earlier today before erasing gains, now down 3.2 per cent from market open.
At the beginning of the week shares in the American video game retailer jumped more than 41 per cent after the business chose shareholder Ryan Cohen as the head of a new committee to help the traditional bricks-and-mortar business pivot to e-commerce.
Cohen, founder of online pet food store Chewy.com, has been pushing GameStop to move away from its traditional model since joining the board shortly before January’s social media frenzy drove a meteoric rise in the company’s stock.
In January GameStop was at the heart of an amateur trading frenzy on Wall Street that led to an unprecedented short squeeze.
The short squeeze was spearheaded by Reddit forum r/wallstreetbets, which describes itself as “like 4chan found a Bloomberg terminal”.
Markets.com chief market analyst Neil Wilson said: “It’s a short squeeze. It’s dealer gamma exposure. No, it’s a fundamental deep value trade based on the company’s ability to be a disruptive force in gaming and deliver a compelling e-commerce offering that supports the long-term investment thesis, which is based on an increasingly progressive free cashflow model. You never actually thought GameStop rally was just froth?
“Most Redditors would agree and maybe, just maybe, there is a fundamental basis for this stock’s 930% rally year-to-date. I’m sure some people genuinely do think it will be the Amazon of gaming. However they are probably less worried about execution risk than they might be.”
January’s short squeeze sent Gamestop shares to more than $400, up from around £16 at the start of the year.
Following January’s trading activity, the stock fell to around $45 per share. It began to steadily climb again on 23 February.