The GameStop-Reddit frenzy continues to lose momentum.
CBS News reports the retailer's stock prices plummeted for a second consecutive day, dropping nearly 60 percent to $91 per share on Tuesday. The news comes less than a week after GameStop shares reached an all-time high of $483—an increase that was largely credited to a group of day traders who ignited a short squeeze using Reddit and social media to spur momentum.
Tuesday's losses sunk GameStop's market value to just $6.4 billion, marking a nearly $29 billion drop from its peak last week. CBS News points out other companies who received a boost during the Reddit-fueled mania are also losing steam. The share price for AMC Entertainment has also plummeted, going from $20 per share last week to just $6.50 on Tuesday. BlackBerry shares also fell from a high of $28 last week to $11 on Tuesday.
The drop in GameStop shares also suggests major hedge funds have closed their short positions in wake of the Reddit rally. Investment firm Melvin Capital, which was known to have bet against failing companies, such as GameStop, was reportedly down $4.5 billion due to the short-squeeze; however, the recent decline in stock prices indicates that many small-time investors who attempted to cash in on the recent surge may have also suffered big losses.
"This was bound to happen — it goes back to the age-old premise that the stock market ultimately at the fringes is driven by greed and fear," Mike Mullaney, director of global markets research at Boston Partners, told theFinancial Times about this week's losses. "I feel badly for anybody who’s jumped on this trade in the last week, especially on the buy side."
