GAMESTOP share values have plummeted as the stock frenzy that saw amateur traders take on Wall Street hedge funds draws to an end.
The world’s financial community was taken by storm last month as hoards of amateur stock traders made the stock value of ailing US retailer Gamestop soar to astronomic heights. Last year a share for the company could be bought for $3.25 – at its peak on Thursday (January 28th) they were worth $482.
Now it seems the stock frenzy is drawing to an end, with Gamestop’s stock prices closing today at $117 – 48% less than its opening price. The headline-making effects of amateur traders taking on Wall Street firms has been linked to Reddit forums and has been seen as many as a David versus Goliath battle for the financial age.
Some of America’s top hedge funds collectively lost $20 billion last month when they attempted to “short” Gamestop – meaning they cast their stock market bets under the assumption that the company’s value would drop. Due to the onslaught of small-time hobbyist traders buying up shares, Wall Street was forced into a “short squeeze” – whereby they had to buy more shares to stem their enormous losses.
The drop in Gamestop prices implies that many buyers have dumped their stocks, predicting an end to the financial phenomenon and wanting to cash in while they can. Other companies that saw their values rocket in the frenzy, including outdated phone makers Nokia and Blackberry, have seen a similar reduction in value.
The bizarre and unprecedented financial events of the last few weeks are sure to go down in financial history and will leave many high profile investors wondering if the rise of amateur trading could threaten their power.
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