The share price of US video game retailer GameStop slid 60 per cent yesterday to $90, down from a high of $347 at the height of a Reddit-instigated short-squeeze on the stock.
GameStop shares rocketed in January after a community led by Reddit forum r/wallstreetbets banded together and piled hundreds of thousands of dollars into the stock, causing the share price to rise.
The Reddit rally was in response to hedge funds shorting the nostalgia stock, which so happened to be a favourite among day traders who hung out on the forum.
But now the short-squeeze appears to be winding down, with the stock sliding a further five per cent in after-hours trading late last night and into this morning.
GameStop shares are still worth considerably more than they were at the beginning of the year, when they were being bought for around $17.
Markets.com chief market analyst Neil Wilson said: “So, the Reddit /wallstreetbets traders got burned. Hardly a surprise, however you dressed it up, it was a greater fool speculative bubble, which would only end one way. The party for so-called ‘memestocks’ was always going to be wild but ultimately rather short-lived. Sooner or later the music stops.”
AMC Entertainment and Blackberry, stocks also caught up in the mania, have also tumbled in the last couple of days, down 41.29 and 21.05 per cent respectively yesterday
Ipek Ozkardeskaya, senior analyst at Swissquote, said the GameStop run was “gently coming to an end”, but that the saga had revealed there is power in unity if traders stick together.
“The loss of momentum in the short-squeeze frenzy highlights that triggering such reverberation in the market is not easy, after all, and the GameStop and AMC may have shown an exceptional performance, and we could wait a while before seeing a similar phenomenon in the future,” he continued.
“A final word on this story: in the context of a short squeeze, we once again saw that a well organised, collective action could make the impossible happen, but the slightest fissure would trigger chaos.”