GameStop Roller Coaster Pauses After $27 Billion Rout
An illuminated logo inside a closed GameStop Corp. store in Frankfurt, Germany. (Photographer: Alex Kraus/Bloomberg)

GameStop Roller Coaster Pauses After $27 Billion Rout


GameStop Corp.’s rapid reversal paused on Wednesday, although last week’s massive peak remains a distant memory after frenzied trading activity cooled.

The stock rose 7% to $96.30 at 6:15 a.m. in U.S. premarket trading, still almost 80% below the record intraday peak of $483 set on Thursday after a community of day traders collaborated to take on the Wall Street establishment and inflict multibillion-dollar losses on hedge funds with large short positions.

“I think what we see in GameStop right now is a dead cat bounce,” Joachim Klement, a strategist at Liberum, said in emailed comments. “Retail investors may be coming back into the stock expecting it to reach old highs from last week. But with shorts so much lower than last week I think it will be very hard to impossible for another short squeeze to materialize in this stock right now.”

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. -- have also had the wind taken from their sails, though AMC rallied slightly to $8.66 in premarket trading.

GameStop Roller Coaster Pauses After $27 Billion Rout

GameStop’s rapid retreat this week 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.”

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.

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