GameStop Corp’s spectacular rally unwound further on February 2. As a result, it pulled other recent favorites of Reddit speculators down with it, after bearish investors appeared to cover their positions and trading volume shriveled.
The stock of the gamemaker has tumbled for the second time in three sessions on February 1 as trading volume slowed to about a third of the amount in the past five sessions following sharp gains from the previous week.
Data from financial analytics firm S3 Partners showed that this decline followed as short interest plunged to 53 percent of the available shares, from more than 140 percent just last month, Bloomberg reported.
It is likely that restrictions put in place to regulate the number of shares a person can buy via the Robinhood app kept away retail investors.
The limits on trading by Robinhood and other online brokerages, put in place as fears of market instability grew more widespread, set off a furious outcry among small investors.
However, since this, the platform has loosened restrictions. It now allows users to purchase a limit of 20 shares of GameStop. That’s up from a cap of one share before the market opened, the report said.
The rage and hell-bent drive to pick on powerful Wall Street financiers has sent shivers through ordinary investors and heightened fears about the fragility of the markets in general.
This comes after a prolonged period of stock gains fuelled by ultra-low interest rates. Those fears just caused the S&P 500 Index to suffer its worst week of losses since October.
“The rise of the Reddit factor is something that is going to be with us in the future, it’s an additional factor that all hedge fund managers should cope with," said Alberto Tocchio, a portfolio manager at Kairos Partners told Bloomberg.