GameStop breaks under $50 a share as brief squeeze involves an finish

The GameStop Corp. logo on a smartphone and the Robinhood website on a laptop.

Tiffany Hagler-Geard | Bloomberg | Getty Images

GameStop, the figurehead of a recent speculative retail frenzy, fell below $ 50 apiece on Tuesday as the massive short squeeze took effect and investors posted gains.

The brick and mortar video game retailer fell 20% to $ 47.81 per share Tuesday after falling 80% last week and posting its worst weekly performance ever. At an all-time high on Jan. 28, the stock was trading at $ 483 per share.

GameStop stepped into the spotlight two weeks ago when an army of retail investors who coordinated trading on Reddit’s WallStreetBets forum rose its stock 400% in just a week. The brief press caused great pain to hedge funds betting against GameStop, while the mania forced several online brokers to restrict trading in a number of highly volatile names.

According to S3 Partners, short interest in GameStop as a percentage of stocks available for trading fell from more than 130% two weeks ago to around 50% on Friday. So most of the short bets have been covered and short sellers have little strength to keep the squeeze going.

Trading volume also fell sharply this week as retail momentum slowed.

Some on Wall Street compare GameStop’s brief print to that of Volkswagen in 2008, when the German automaker briefly became the largest company in the world.

Other stocks that have seen speculative trading activity are also rallying. AMC Entertainment is down 20% this week after falling 48% last week. Koss is down 11% this week and 68% the week before.

Wall Street breathed a sigh of relief when it turned out that the frenzy was limited within a handful of names and seemed to have subsided. Many had feared that this could spill over into other areas of the market and further affect investor confidence.

“We know financial conditions are supportive and investors have become more enthusiastic … but that doesn’t mean the stock market is in a speculative bubble,” said Kristina Hooper, Invesco’s chief global markets strategist.

Subscribe to CNBC PRO for exclusive insights and analysis as well as live business day programs from around the world.

Comments are closed.