After the video game retailer announced plans to issue new shares and disclosed that the US Securities and Exchange Commission is investigating the trading activities of its shares, GameStop’s stock price fell 27% on Thursday.
The company was one of the first companies to become the so-called meme stocks favored by retail in January. The company said after the market closed on Wednesday that the U.S. Securities and Exchange Commission had contacted its staff on May 26 to seek an investigation into its stock activities. Assistance. GameStop stated that it does not expect the investigation to “adversely affect us” and plans to “fully cooperate with the SEC on this matter.”
The retailer also stated that it plans to submit a registration of up to 5 million additional shares to the US Securities and Exchange Commission. If issued, it will dilute the value of existing investor shares.
“When you dilute the stock for shareholders, your stock price should fall, so in a sense it is normal. In addition, GameStop relies on elf and dreams,” the managing director of Loop Capital in charge of the gaming industry Anthony Chukumba said.
“The stock is completely out of touch with the fundamentals and has not changed. Therefore, whatever GameStop reported yesterday has no effect on Reddit traders.”
In the past two weeks, GameStop and some other stocks favored by retail have rebounded sharply as amateur investors have regained their enthusiasm for trading since earlier this year. At the end of January, retail traders organized on the online message board and tried to make the hedge funds that bet on GameStop suffer losses by pushing up their stocks.
But industry experts point out that the latest volatility in the valuations of retail companies’ most popular companies shows that hard-hit investors are now also participating with retail investors.
“The retail industry alone cannot cause these drastic changes,” Chukumba said. “Hedge funds are not idiots. Many people have figured out this game and how to use it.”
According to the data provider, despite the drop in share prices on Thursday, the discussion on GameStop on the Reddit message board was quiet compared to other popular stocks. Again, this suggests that retail investors may not be so active in the recent decline.
According to data from data provider BreakoutPoint, the company ranks bottom of the top 10 most discussed stocks on the platform. “Unexpectedly few. They are not so excited, nor so angry,” said Ivan Cosovic, the founder of BreakoutPoint.
Retail activity has cooled in the months since the stocks of GameStop and other companies first rose, but it has risen again in recent weeks, led by the theater chain AMC Entertainment. Last Wednesday, AMC’s stock price rose by 95%.
On Thursday, AMC also fell more than 13% in New York. Since the beginning of this year, its stock price has risen by more than 2,000%. Since the beginning of this year, GameStop has risen by more than 1,177%.
So far, the resurgence of the retail trading boom has not affected the broader stock market. The blue chip S&P 500 index and the technology stock Nasdaq Composite Index closed up 0.5% and 0.8% respectively in New York, after trading in a narrow range in the previous trading days.
Maneesh Deshpande, Barclays U.S. Equity Strategy Director, said: “These small-scale fires are happening everywhere in the forest, but they have not led to wider forest fires.” “This is worrying, but it is not a macro event.”