GameStop’s stock slide speeds up as US senator steps in
The slide in GameStop shares accelerated today as US officials warned they may step in to investigate the trading frenzy that has roiled markets in recent weeks.
A surge in buying by amateur traders, fuelled by activity on social media, sparked big moves in shares of companies that were shorted by Wall Street hedge funds.
But many of these stocks have posted sharp declines this week as the trading frenzy began to wear off.
GameStop, which has become the poster stock for the Reddit-fuelled market showdown, plunged 36 per cent to $59.45. Shares had hit a peak of $483 a week ago.
Cinema chain AMC has more than halved after two weeks of the battle that has pitched Wall Street against amateur traders.
Kim Forrest, chief investment officer at Bokeh Capital Partners, said retail investors who had suffered losses over the past two weeks were now likely to be more cautious in bidding up shares of companies with a high short interest.
“[Retail investors] can see that this is a roller-coaster ride and not a one-way trip up, and that’s probably given them a little more pause before pushing the buy button,” she said.
It came as US Treasury Secretary Janet Yellen said she needed to “understand deeply” the craze that has gripped stock markets in recent weeks.
Yellen will meet with the heads of the Securities and Exchange Commission (SEC), Federal Reserve Board, Federal Reserve Bank of New York and Commodity Futures Trading Commission to discuss the affair.