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GameStop Shares Drop, Extending 80% Slump From Last Week

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Paul Jarvis and Elena Popina
·2 min read
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(Bloomberg) -- GameStop Corp. extended its decline Monday, shedding another $263 million in value after its worst week on record.

The stock fell 5.9% to close at $60 in New York trading, after whipsawing between gains and losses earlier in the session. It slumped 80% last week, a drop that followed three weeks of dizzying gains. Trading volume also dipped with about 25 million shares changing hands, the lowest since Jan. 12.

Robinhood Markets Inc.’s move late last week to end buying limits on GameStop has had limited impact on the stock, which has lost most of its gains since touching an intraday high at $483 on Jan. 28. Inflated levels of short interest that triggered a squeeze on the shares have declined after a number of hedge funds closed positions and incurred huge losses.

“Looks like the price is quickly getting closer to fair value,” said Jack Ablin, chief investment officer at Cresset Capital. “It would appear to me that the Robinhood trades ran through GameStop and now have turned their attention to other stocks. That means more room for a pullback for GameStop.”

“Extremely elevated short interest is a pre-condition for a major short squeeze to occur,” Goldman Sachs Group Inc. strategists wrote in a note dated Feb. 5, saying that GameStop -- on which short interest had exceeded 100% of the float of the company -- has been a “highly unusual” situation.

Investors shifted their attention to other retail favorites with “meme stocks” like Nemaura Medical Inc. and Ring Energy Inc. soaring 41% each, while Senseonics Holdings Inc. surged 23% and Zomedica Corp. advanced 42%.

Volumes in GameStop options remained high, with open interest in puts and calls rising further last week as the stock price tumbled. While calls open interest has climbed, volumes on the bearish put contracts have jumped to almost five times the amount.

GameStop Was as Fun as Pulling Teeth by the End: John Authers

“While the GME game may have come to an end -- at least for now -- its after-effects will linger,” Steve Sosnick, chief strategist at Interactive Brokers, wrote in a note. “New regulations are likely to arise, and we can only hope that they are sensible.”

(Updates share price move in second paragraph and adds more commentary in fourth paragraph.)

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