GameStop Stock Price Has Dropped Substantially
GameStop is no longer the Wolf of Wall Street, as the video game store's wild ride on the stock market seems to be coming to an end. If you'd asked anyone what they knew about GameStop only a few weeks ago, they'd likely have told your it's a struggling American store that's been hit hard by COVID-19. With footfall through the floor thanks to COVID-19, GameStop became the unlikely candidate of Reddit's mission to upend the stock market. Stocks soared, the general public made a fortune, and hedge funds bottomed out of the market. Now, things seem to be going back to some form of normality.
It was a case of robbing from the rich and giving to the poor after the ironically named Robinhood consumer trading app tried to block the purchase of stocks in the like of GameStop and AMC Cinemas. It all started when investment subreddit, r/wallstreetbets, championed GameStop's stocks and forced the prices through the roof. Although there were some fluctuation and all the usual peaks and troughs of the stock market, things have levelled out and GameStop stocks are plummeting. By the close of business on Tuesday, February 2, GameStop's stock prices had been hit by a massive 60% drop.
What's going on with the GameStop stock price?
Click to enlargeAccording to Bloomberg, stocks have started to drop beneath $100, which is a dropoff of around $200 from last week. Despite hopes the stock could rally again, it's looking increasingly unlikely. Like we previously mentioned, the market for physical games is in disarray as digital sales continue to soar. The likelihood is that while GameStop's stock price will settle at higher than last year, the Reddit hype that propelled the company's valuation from $1 billion to $20 billion is seemingly dying down.
Matt Maley, chief market strategist at Miller Tabak & Co., warned Bloomberg, "Short squeezes can only last as long as there is a large short position in a stock. Once that dissipates, the situation changes completely". But what does this mean in the long run? Over at WallStreetBets, the Reddit community is asking everyone to hold onto their stock. It's a tactic that doesn't seem to be working.
Adding to the dwindling interest, billionaire and Dallas Mavericks owner Mark Cuban shared his views during a Reddit AMA. Discussing what happens next, Cuban confessed, “I have no doubt that there are funds and big players that have shorted this stock again thinking they are smarter than everyone on WSB. I know you are going to hate to hear this, but the lower it goes, the more powerful WSB can be stepping up to buy the stock again".
Is this the end of soaring GameSpot stock prices?
Looking closer at GameStop, its Tuesday stock price peaked at $137. Although this is nearly double its opening price, it's a huge drop from the $411 from last week. It's also a steep decline from the steady run of $300 that has made early investors a small fortune. Those who held onto their stocks on Tuesday ended the day with a worrying loss of $135 per share.
While Cuban and his fellow billionaires are more than equipped to stick their middle finger up at Wall Street, the stock market can be a dangerous place for newcomers or those who can't afford the gamble. The idea of the GameStop experiment was to see how much we could disrupt the market. It worked for a while, but like every bubble, it was always going to burst some day. Ultimately, money talks, and with Wall Street holding most of the cards, GameStop enjoyed its fame while it lasted
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