[ad_1]
Shares of GameStop tumbled 65% in early trading on Wall Street as the trading craze unleashed by small investors, which sent its shares soaring and cost hedge funds billions of dollars, lost momentum.
The troubled Texas-based video game store chain has been the focal point of a battle of small merchants, using forums like Reddit, to punish Wall Street hedge funds that have bet certain stocks lose value. GameStop shares peaked at $ 482 last Thursday, but fell to $ 80 shortly after the market opened. They rallied to $ 117 mid-session, but closed 60% at $ 90.
A year ago, shares in the 37-year-old chain, which plans to close 450 stores this year, were changing hands at $ 3.25 a share.
Other very short stocks that are also the subject of amateur investors on influential forums like WallStreetBets on Reddit are also in freefall. AMC Entertainment, the world’s largest cinema chain and owner of Odeon in the UK, lost 55% shortly after the opening bell on Wall Street. It later recovered some of those losses to trade at $ 8 mid-afternoon.
Other companies whose stocks were caught up in the frenzy, including Blackberry, Nokia and US retail chain Bed, Bath & Beyond, also lost ground.
Silver, which has also been caught up in the trading frenzy and hit $ 30 an ounce for the first time in eight years on Monday, is down 12%.
Analysts said the size of the silver market makes it much harder to sway than a single stock. “In this case, the fundamental drivers are held, at least for the moment, against the irrationality of the markets,” said Carlo Alberto De Casa, chief analyst at ActivTrades.
Sign up for the daily Business Today email
The fall in GameStop shares indicates that hedge funds that bet against it, which had been caught in a “small contraction”, a situation in which they were forced to buy more shares in an attempt to contain their losses, now they have closed their positions. .
Short sellers of Gamestop shares took a hit of $ 20 billion last month, but short interest in the shares, as a percentage of shares available for trading, has plummeted from 114% in mid-January to around the 39%, according to IHS Markit data.
“GameStop shares will return to $ 10 sooner or later once this craze has subsided,” said Neil Wilson, chief market analyst at Markets.com. “With the hedges covered, the relaxation will be brutal.”
The American stock trader, who was the real wolf of Wall Street, also warned investors that “they could lose everything.” Jordan Belfort was jailed in 1999 for insider trading. He had run a “pump and pull” trading scam, based on selling penny stocks to gullible investors, costing them about $ 200 million. His autobiography later became the movie The Wolf of Wall Street, starring Leonardo Di Caprio and directed by Martin Scorsese.
Belfort, 58, now an author and motivational speaker, told the BBC that Reddit investors who had invested their money in old-fashioned stocks that Wall Street professionals were betting against should be careful: “If you’re seeing this as a way to live, you will have to catch a falling knife. I urge people to get their chips off the table. “
He added: “Keep in mind that you are the last person in the car, that’s really the danger here.”
