GameStop’s Bubble Deflates Further After $27 Billion Rout

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Feb 03 2021, 1:47 PMFeb 03 2021, 3:51 PMFebruary 03 2021, 1:47 PMFebruary 03 2021, 3:51 PM

(Bloomberg) -- GameStop Corp. shares continued their rapid fall back toward earth on Wednesday, with last week’s massive peak now a distant memory.

The stock slid 7% to $83.80 at 4:25 a.m. in U.S. premarket trading, more than 80% below the record intraday peak of $483 set on Thursday.

GameStop, the poster child for Redditors looking to squeeze short sellers, plunged 60% Tuesday, and has now erased more than $27 billion in market value from last week’s all-time high. Several other favorites of the Reddit community -- including movie-theater chain AMC Entertainment Holdings Inc. and clothing retailer Express Inc. -- also tumbled, with AMC falling a further 11% to $6.96 in premarket trading.

GameStop’s rapid retreat has coincided with a sharp reduction in short interest after bearish investors appeared to cover their positions. That has loosened a squeeze on the stock caused by day traders who used Reddit forums to tout and bid up out-of-favor stocks that also included American Airlines Group Inc. and BlackBerry Ltd.

“The loss of momentum in the short-squeeze frenzy highlights that triggering such reverberation in the market is not easy, after all,” Ipek Ozkardeskaya, senior analyst at Swissquote, said in written comments. “We could wait a while before seeing a similar phenomenon in the future.”

GameStop has now given up more than 80% of the sharp gains that were fueled by last month’s attack on short sellers. Even with the latest pullback, however, the Grapevine, Texas-based retailer is still up 377% year-to-date, based on most recent closing values.

Billionaire entrepreneur Mark Cuban told Reddit investors on Tuesday morning to hold on to their GameStop stocks if they could afford it.

“If you can afford to hold the stock, you hold. I don’t own it, but that’s what I would do,” the 62-year-old wrote on Reddit during a “Ask Me Anything Session” to discuss investment strategies.