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Summary
- The rally in GameStop and other targeted stocks by Reddit traders seems to be fizzling out sharply.
- GameStop was down over 60 per cent in Tuesday’s session alone, losing more than 80 value from the year’s high.
- The sharp fall is expected to have materialized due to a significant reduction of short positions by the hedge funds.
The rally in GameStop has probably come to an end as the share price tanked by a massive 60 per cent on Tuesday and closed the session at US$90. The unprecedented volatility seen in this counter is still quite high. However, it is the first time since 27 January 2021, that GameStop has dropped below US$100.
The stock has tumbled by a massive 81.3 per cent from the high of US$483 reached on 28 January 2021. Despite this massive fall, the stock is still up more than 370 per cent for the year.
Other stocks that Reddit traders were targeting are also losing steam now. AMC Entertainment Holdings Inc’ (NYSE:AMC), a famous movie theatre chain, also fell by 41.2 per cent on Tuesday, losing 61 per cent of the value from the high of US$20.36. Another favourite of the Reddit traders, Express Inc (NYSE:EXPR) was also down over 32 per cent on Tuesday.
The stocks declined so sharply that it triggered multiple trading halts across a pack of stocks, which dealt a huge blow to the hedge funds in the last two weeks.
Read More: GameStop shares continue haunting short sellers
The primary reason for the decline is stated to be a significant reduction in the short positions by the institutions and hedge funds. After incurring multi-billion dollars in losses, the hedge funds have finally given up on these stocks; as a result, the Reddit army might have also lost interest after pocketing millions in profit.
The fall in the entire pack of targeted shares came despite the brokers lifting restrictions on buying these shares. Earlier during the rally, some of the brokers had restricted the additional purchase of these shares. Robinhood founder Vladimir Tenev cited regulatory requirements as the reason for restricting the buy orders.
However, despite this massive fall, some Reddit traders are still optimistic and telling everyone who still have a chunk of these shares to “hold the line”. Even, tech entrepreneur Mark Cuban has endorsed this move encouraging to hold the stock.
