GameStop has lost over $20 billion in market cap since the stock’s Reddit-saga peak back on January 27.
Shares in the video game retailer dropped around 86% over the past week and a half to under $50 per share on Tuesday. The fall comes as the Reddit retail-trader phenomenon continues to fade.
The Reddit drama began back on January 11, when activist investor and Chewy co-founder Ryan Cohen sent a letter to GameStop decrying the current state of the company and arguing for changes to modernize the brand.
Then Reddit traders realized that GameStop and other companies were susceptible to a short-squeeze.
A short squeeze occurs when a stock jumps sharply higher due to new investment. It forces short sellers to buy in order to limit their losses, pushing stock prices even higher.
GameStop shares popped after Reddit traders rushed into the name, rising some 1,600% in under a month in one of the largest short-squeezes in history.
The dramatic move saw institutional investors in GameStop lose billions in a matter of days. On the other hand, some Reddit traders saw huge gains.
The returns for retail investors were so significant that Reddit traders started looking for other short squeeze opportunities. They targeted shares of legacy tech names, AMC movie theatres, and even silver for a while until brokerages stepped in and halted buying in many of the most popular stocks for Reddit traders.
The move led retail traders to sue. They weren’t allowed to close their positions and were forced into losses by their brokers.
For now, it appears the Reddit trader phenomenon is winding down. Shares of video game retailer dropped at around $50 per share. It leaves little hope for sudden huge gains for anyone who bought the stock at all-time highs.
GameStop traded down 21% on Monday, giving the company a market cap of just $3.3 billion.
GameStop
It is an American video game, consumer electronics, and gaming merchandise retailer. The company is headquartered in Grapevine, Texas, United States, and is the world’s largest video game retailer, operating 5,509 retail stores throughout the United States, Canada, Australia, New Zealand, and Europe as of February 1, 2020.