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GameStop Plunges 60%, Has Lost More Than 70% of Its Value Since Friday

Carlo Allegri | Reuters
  • Shares of GameStop sank further on Tuesday, with shares of the volatile retail-trader favorite sliding 60% to finish at $90 per share.
  • GameStop's shares have traded wildly in recent weeks after retail traders on Reddit sparked a short squeeze in the stock.

Shares of GameStop sank further on Tuesday, with shares of the volatile retail-trader favorite sliding 60% to finish at $90 per share.

The tumble follows a more than 30% drop during the regular market session Monday after finishing at $325 per share on Friday. That brings the two-day loss to 72%.

GameStop's shares have traded wildly in recent weeks after retail traders on a Reddit forum sparked a short squeeze in the stock, a phenomenon where traders who had bet against the stock are forced to buy it to limit their losses, pushing the price even higher.

Short interest in GameStop as a percentage of shares available for trading dropped to about 53% from over 110% a week ago, according to data from S3 Partners.

"Both fundamental and momentum short sellers have found opportunities and price exit points to trim their positions in the face of these losses as the GME short squeeze is in full force," said Ihor Dusaniwsky, S3 managing director of predictive analytics.

The recent covering pared short sellers' losses in the stock to about $13.4 billion year to date, from nearly $20 billion just last week amid the stock's remarkable pop, S3 data showed.

Retail activity, driven in part by the Reddit forum WallStreetBets, has helped fuel extreme volatility and high trading volume in GameStop and other stocks. However, Monday's trading volume was the lowest in the brick-and-mortar video game retailer's stock since Jan. 20, according to FactSet.

However, one popular Reddit user, DeepF******Value, is apparently still holding onto his GameStop shares, incurring a loss of about $5 million following Monday's drop, according to a screenshot showing the user's portfolio. A screenshot on Tuesday showed that his 50,000 shares had dropped another $6.75 million that session, with his position falling by more than $13 million when including options.

The dramatic decline for GameStop was mirrored by similar reversals in other popular Reddit trades, such as AMC Entertainment. The volatile period has drawn comparisons to other historical short squeezes, including the Volkswagen short squeeze of 2008.

The rapid moves in the highly shorted stocks have been marked by rolling restrictions on trades at different brokerages. Square-owned Cash App said its clearing broker had halted trading of AMC and Nokia during part of Tuesday's session, but trading resumed in the afternoon.

GameStop came off its lows of the sessions on Tuesday after Robinhood further eased restrictions on trading the stock, allowing customers to buy up to 100 shares. However, shares turned south again after a brief uptick.

The wild trading has drawn varying reactions from some of the country's highest profile investors. Billionaire Mark Cuban said Tuesday he didn't expect the new retail crowd to go away after the GameStop story was over, and he blamed brokerages and regulators for not being more transparent about the potential for trading limits.

However, PIMCO co-founder Bill Gross said that better transparency wouldn't have saved some retail traders from getting burned in a crash.

"The victims in the GameStop experiment have and will continue to be the Robinhood investors storming the gates of capital markets ... without the size, the endgame plan, and the mathematical option pricing expertise to succeed," Gross said in a note. "Even without regulatory action, the plan was doomed from the beginning."

The volatile moves and brokerage restrictions have garnered attention from politicians and regulators in Washington. The chairwoman of the House Committee on Financial Services, Rep. Maxine Waters, D-Calif., announced on Monday that there would be a hearing on Feb. 18 about the recent trading in GameStop.

— with reporting from CNBC's Yun Li and Maggie Fitzgerald.

Correction: Cash App said its clearing broker had halted trading of AMC and Nokia during part of Tuesday's session. An earlier version misstated the stocks.

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