GameStop shares sink, price of silver falls as Reddit frenzy fizzles out

Videogame chain's shares down 54% in late trading

US videogame chain gameStop’s shares were down 54% at $106 in late trading scaling a high of $483 last week.

Shares of the US videogame GameStop sank and the buying spree for silver led by small investors subsided as the Reddit-driven trading frenzy that has shocked global financial markets over the past week started to show signs of fizzling out.

The US videogame chain’s shares, which have see-sawed in a slugfest that has seen billions of dollars gained and lost by hedge funds and other financial investors, were down 54% at $106 in late trading scaling a high of $483 last week.

Spot silver prices, an alternative focus in the battle between a pack of small traders and Wall Street hedge funds, fell more than 5% after hitting an eight-year high a day earlier.

Analysts said the silver pullback may show the limits of small investors’ impact in a large market, while posts on the popular Reddit forum, WallStreetBets, ranged from those giving up on the GameStop trade to calls to stick with the stock.

“The stocks side of things has faded because they all had a look at silver yesterday, but my feeling is they’ll be back, depending on whether retail trading platforms will allow you to buy more than one share,” said Keith Temperton, an equity sales trader at Forte Securities.

Another Reddit favourite, movie theater operator AMC, slumped 40% at one stage, although it remains significantly higher than the start of the year, before the organised band of small buyers piled in and forced a “squeeze” that required big funds to close short positions by buying shares at very high prices.

Online broker Robinhood, on whose platform much of the buying and selling has taken place, confirmed on Monday it had raised another $2.4bn (€2bn) from shareholders following a $1bn boost last week as it strives to meet demands for additional collateral to cover trades.

The broker has also held talks with banks about raising another $1bn in debt, people familiar with the matter told Reuters.

Analysts at financial institutions continued to predict the action, which has drawn the attention of regulators, politicians, and celebrities, was likely to fade, it was just a question of how soon.

“The hope factor of this stock is very big,” said Chris Bailey, strategist at Raymond James.

“So over this year, does the share price continue to go down? The answer is yes. We’ve seen it with internet shares in 2000 and so I think it will happen again.” 

Reddit moderators had on Tuesday removed one of the most popular posts suggesting buying silver and many WallStreetBets posts focused on riding out the volatility. — Reuters