After a volatile, two-week ride “to the moon” powered by an army of online cheerleaders on the Reddit platform, GameStop and AMC Entertainment plunged back to earth in Tuesday trading as questions continue to swirl around the stunning upset of financial power on Wall Street.
On a day when stocks closed broadly higher on Wall Street, GameStop plunged 60 per cent and ended the trading day EST at $90, AMC Entertainment lost 42.3 per cent to $7.70 a share. Both companies have been firmly in the spotlight for more than two weeks as they skyrocketed to never before highs.
GameStop zoomed to $483 last Thursday after beginning this year at just over $17 a share. Redditors who fuelled the surge in a clutch of stocks heavily shorted (expected to fall) by hedge funds, remain in a combative mood. Market analysts agree that retail investors banding together online and fighting back against short sellers is a movement that is here to stay.
“Nice dip!”, “Hold!” read posts from active Redditors on the r/wallstreetbets forum as GameStop slid into the red after a dream run.
Billionaire entrepreneur Mark Cuban told CNBC he expects that small traders who helped GameStop surge will remain a force in the market. “I always was taught, ‘You get long and you get loud’,” Cuban said. “It’s just WallStreetBets that’s doing the ‘getting loud’.”
In December 2020 statements, Reddit claimed it has 52 million daily users. This is far lower than say, Facebook or Twitter but whatever the numbers, the GameStop story is a lore for the triumph of the underdog. The GameStop stock soared 1,625 per cent in January 2021 alone.
Hailed as a hero for his role in backing the stock, Keith Gill, 34 rocked the US market headlines last week. Wall Street Journal hailed him as the man who “Drove the GameStop Reddit Mania” and turned the “investing world upside down. Gill’s reddit username “u/deepf____ingvalue” is unlike his posts – mostly ho-hum screenshots of stock valuations. His hours-long January 22 thesis on the case for GameStop has got more than 650,000 views on the ‘Roaring Kitty’ YouTube channel. Gill has not posted since then.
For days, corporate finance pundits have been urging small investors to plan their exit from GameStop and AMC-like stocks. Their case is simple: the stock price has little to do with future prospects of the mall-based retailer, which has been burning cash.
Scientists studying digital platforms are drawing parallels between the glaring excess sweeping Wall Street and the social media fuelled frenzy that led up to the January 6 riot at the US Capitol. “There’s an important distinction between an actor who is coordinating manipulation, and a retail investor who gets caught up in the movement,” Sinal Aral, director of the Massachusetts Institute of Technology’s Initiative on the Digital Economy, told AP. “We witnessed those two types of people in the Capitol riot as well”.