The stock rally in video game retailer GameStop (NYSE:GME) is fading, erasing more than $25 billion U.S. in market value in the process.
GameStop’s stock, which soared after retail investors squeezed short sellers, fell 60% Tuesday, closing below $100 U.S. per share for the first time in a week. Several other stocks targeted by crowds on Reddit, such as movie-theater chain AMC Entertainment (NYSE:AMC) and clothing retailer Express (NYSE:EXPR), also fell sharply.
GameStop shares closed at $90 U.S. a share. The stock’s retreat came after bearish investors covered their positions. That has loosened a squeeze on the stock caused by day traders who used Reddit forums to tout and bid up out-of-favor stocks that also included American Airlines (NASDAQ:AAL) and BlackBerry (TSX:BB).
GameStop has now given up more than 80% of the sharp gains that were fueled by last month’s attack on short sellers. Even with the latest pullback, however, the Grapevine, Texas-based retailer is still up 377% year-to-date.
Tuesday’s drop came despite a loosening of restrictions on the number of shares investors can buy using Robinhood. On Monday afternoon, the popular trading app started allowing users to purchase up to 20 shares of GameStop, up from a limit of one before the market opened.
Short sellers have reduced their interest in GameStop, having sustained multibillion-dollar losses with just over one million shares covered on Monday. The short interest in GameStop tumbled to 51% of its free float, according to data from the financial analytics firm.
