GameStop shares fell by half in afternoon trading Tuesday, cleaving off more of the stock’s recent blockbuster gains following a social media-led campaign to get it to skyrocket at the expense of big Wall Street funds.
Shares were down 50.6 percent to about $110 apiece as of 1:30 pm Eastern, following a 31 percent decline a day earlier. The stock closed out January at $325 a share, far above the $17 it fetched at the beginning of the year.
The pullback is the latest example of the extreme volatility that’s marked GameStop’s meteoric run. Last week a 44 percent drop on Thursday was followed by a 68 percent jump Friday. The extreme moves have been driven by a frenzy of speculative trading and appear to have little to do with the actual prospects of the company, which has been losing money consistently.
The business model of the mall-based retailer of physical copies of video games has taken a beating as fewer people go out shopping in malls and as more people download video games instead of buying them in stores.
Investors on Reddit and other social media portals have banded together in recent weeks to snap up shares of GameStop, AMC and other struggling chains, stocks that several Wall Street hedge funds had bet would fall. Some of those hedge funds have now admitted defeat and walked away from those bets in a stunning reversal of financial power on Wall Street.
The number of GameStop shares that have been shorted (bets that the stock will fall), were slashed by more than half in recent days, according to a report Monday by the analytics firm S3 Partners.
Shares in some stocks that have also been hyped by some traders on Reddit were also down Tuesday, bucking the broader market’s rally. AMC Entertainment fell 41.4 percent, headphone maker Koss Corp., slid 39.5 percent and BlackBerry dropped 19.1 percent. The S&P 500 index, meanwhile, was up 1.6 percent.