GameStop shares were down roughly 40% on Tuesday after slipping more than 100 points on Monday, leading some to suspect that last week’s short squeeze is on its way out.
After closing at a high of roughly $347 on Wednesday, GameStop opened Tuesday at just over $150. Until Tuesday, retail traders using the online brokerage firm Robinhood, now one of the most downloaded apps on the Apple App Store and popular among the Reddit traders who initially shot GameStop’s shares up last week, could only purchase four shares of GameStop at a time, though they could sell as many shares as they wanted.
Those limits have resulted in significantly depressed volume, which generally translates to less volatility in the stock. Trading volume in the stock peaked on Jan. 22 with nearly 198,000,000 shares trading hands and have since dropped to just 36,600,000, according to Yahoo Finance. That trading volume is still higher than the activity seen in GameStop before Reddit traders thrust the stock into the spotlight.
After markets opened, GameStop’s shares continued to drop, trading as low as $103 in the early morning.
Reddit users targeted GameStop and other previously undesirable stocks after the company became one of the most shorted stocks on the market. In early January, GameStop had a larger short interest, or the number of shares involved in short positions, than the company’s total number of shares. The thousand-fold price increase last week badly hurt firms that relied on risky short positions for big payoffs. Melvin Capital Management lost more than 50% on its investments in January, according to the Wall Street Journal, losses fueled predominantly by GameStop’s surge.
But the David and Goliath narrative pitting retail Reddit traders against institutional hedge funds failed to tell the whole story: Just two firms, BlackRock and Fidelity’s FMR, owned more than 25% of all GameStop shares in September, a position now worth billions of dollars.
Retail traders on Reddit’s r/WallStreetBets appeared undeterred in the face of the sharp slide, telling each other to “buy the dip and hold” and to “use the opportunity to buy more stonk.” “Stonk” is popular internet slang for stocks.
