Meme shares hit a wall Thursday as GameStop, AMC and Clover all fell massive
The WallStreetBets forum on the Reddit Inc. website on a laptop computer and the logo on a smartphone in Hastings-On-Hudson, New York, USA on Friday, January 29, 2021.
Tiffany Hagler-Geard | Bloomberg | Getty Images
The meme stock mania caused by the day trading Reddit crowd fizzled out a bit on Thursday.
It’s easy for many speculative names favored by retail investors like AMC Entertainment and GameStop to come as they suffered double-digit losses on Thursday and pulled back from their recent explosive rallies. The video game retailer even lost more than 20% after hiring two high profile executives at Amazon. The cinema chain lost 10% on Thursday and went negative during the week.
Another glowing meme stock, Clover Health, which sat on WallStreetBets’ message board this week, retreated 10% on Thursday. Clean Energy Fuels, which was up over 31% as recently as Wednesday, fell 15%.
If the January trading mania is any indication, it’s no surprise that these recent rallies turn out to be short-lived. CNBC PRO analysis, available exclusively to subscribers, found that Reddit shares ran an average of nine trading days from launch to their first big drop during the initial frenzy in early 2021.
CNBC identified the starting point for five stocks popular on message boards earlier this year – GameStop, AMC, Bed Bath & Beyond, BlackBerry, and Koss Corp. – by finding out for the first time that the daily trading volume of each stock doubled at least its 30-day moving average of stocks traded. This typically represents the point at which a flood of new investors became interested in a stock that wasn’t trading heavily.
On Thursday, GameStop investors appeared to be running for the exits after the company said it had named former Amazon executive Matt Furlong as its new CEO. Another former Amazon executive, Mike Recupero, has also been elected CFO. Meanwhile, the company’s first quarter results showed revenue up 25% and a loss less than a year ago.
The decline in stocks came when GameStop also said it could sell up to 5 million shares. Additional shares dilute the value of the shares of the existing shareholders. However, the stock is still up more than 1,100% year over year.
AMC is down for the second straight day after rising 83% last week. The cinema, which was on the verge of bankruptcy not so long ago, sold 20 million shares in two separate transactions amid the rally last week, generating around $ 800 million in capital.
– CNBC’s Nate Rattner contributed to the coverage.
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