GameStop stock prices rose on Tuesday, falling 60% to $ 90 per share. The drop indicated that WallStreetBets Reddit’s popular stock market discussion forum, one of the main forces behind last week’s spectacular rally on the video game retailer’s and others ’troubled actions, could be losing its magic to move the market.
The fall of GameStop followed a sharp reduction in short interest on the stock, which measures how many of the company’s shares have been lent to sell. Many had pointed to this short interest rate, which was previously high, and the fact that hedge funds and others betting against the video game retailer had shrunk as GameStop shares had risen.
“These things can last longer than people expect, but when they disconnect, they can disconnect pretty quickly,” said Ross Mayfield, Baird’s investment strategist. “When it comes to a completely speculative craze and game, someone will stick with the bag.”
The fall, which was followed by a sharp drop in GameStop shares on Monday, could also cause significant losses for some of the individual investors who had followed the positive stock market suggestions posted in WallStreetBets. The forum has grown in popularity last week and has grown to eight million members. GameStop shares hit an all-time high of $ 483 on Thursday.
Since then, the price of GameStop shares has fallen 81% in less than a week. This wiped out about $ 29 billion in the company’s stock market value, which in its last week had a market capitalization of $ 35 billion. On Tuesday, that market value plunged to $ 6.3 billion.
Stock prices of other companies that have received reinforcement mentions on WallStreetBets have also fallen sharply. Shares of AMC Entertainment also fell 40% on Tuesday, to just under $ 8 each. These shares had been up $ 20 last week. Shares of BlackBerry, which had reached $ 28 last week, fell 21% on Tuesday to $ 11.50, while Koss fell 43%.
The acting chairman of the U.S. Securities and Exchange Commission, Allison Herren Lee, told NPR on Monday that the stock market regulator is studying different aspects of the sudden rise in GameStop shares, including whether brokers go act appropriately and if there has been any market manipulation. He also warned that companies were trying to raise money by selling shares at prices that appeared to be inflated by social media-driven traders and were unsustainable.
CBS MoneyWatch reported on Monday the moderators of the WallStreetBets discussion forum had recently detected a “large amount” of bot activity in the stock recommendation content being posted to their group.
Naked Brand Group, which sells underwear for both men and women, announced Monday that it had sold more than 29 million shares in a continuing bid of $ 1.70 each, raising $ 50 million for the company. . The company, based in Auckland, New Zealand, is in the process of closing all its stores in favor of online sales.
Shares of Naked Brand had been trading at just 7 cents each in November. In its bid document, filed with the SEC, the company said its share price had experienced “extreme volatility” in recent weeks. Price changes were said to appear to be driven by social media talks, as well as the company’s “short-term interest,” as well as other factors.
On Tuesday, shares of Naked Brand fell to 91 cents each, a 45% drop from Monday’s bid price. A Naked Brand spokesman did not return a CBS MoneyWatch request for comment.
—The Associated Press contributed to this report.