GameStop shares fell 27% on Thursday, after the video game retailer announced plans to issue new shares and revealed that the United States Securities and Exchange Commission was investigating trading activity in its shares. .
The company, which was one of the first to become a so-called retail preferred meme in January, said after markets closed on Wednesday that the SEC contacted its staff on May 26 for advice. help in an investigation of its stock market activity. GameStop said it did not expect the investigation “to have a negative impact on us”, and that it plans to “fully cooperate with the SEC on this matter.”
The retailer also said it plans to file an SEC registration for up to 5 million additional shares, which, if issued, would dilute the value of the shares of current investors.
“When you dilute for shareholders, your stock price is supposed to go down, so in a way, it’s a sense of normalcy. Other than that, GameStop is trading on pixie dust and dreams, ”said Anthony Chukumba, Managing Director of Loop Capital, which covers the gaming industry.
“The title has completely disconnected from the fundamentals and that has not changed. So whatever GameStop reported yesterday wouldn’t make any difference to traders on Reddit.
GameStop shares, along with a handful of other retail preferred stocks, have rebounded widely over the past two weeks, as amateur investors have renewed their enthusiasm for trading since the start of the year. . In late January, retail traders organized themselves into online messaging forums and succeeded in inflicting losses on hedge funds betting against GameStop by pushing up its shares.
But industry experts note that the speed of recent fluctuations in the valuations of retailer-preferred companies suggests that the most powerful investors are now participating alongside retail investors as well.
“Retail alone cannot cause these sudden movements,” Chukumba said. “Hedge funds aren’t dumb, there are a bunch of them that have figured out this game and how to exploit it.”
Despite Thursday’s drop, discussions on GameStop on the Reddit discussion boards were cut off from other popular actions, according to data providers. Again, this suggests that retail investors may not be as active in this latest drop.
The company made it to the bottom of the top 10 most discussed stocks on the platform, according to data provider BreakoutPoint. “It’s surprisingly little. They’re not that excited, they’re not that angry, ”said Ivan Cosovic, founder of BreakoutPoint.
Retail activity had slowed in the months since the first jump in GameStop and other company shares, but has grown again in recent weeks, spurred on by movie chain AMC Entertainment. AMC shares rose 95% last Wednesday.
AMC also fell more than 13% in New York on Thursday. Its stock is still up more than 2,000% since the start of the year. GameStop is up over 1,177% year-to-date.
So far, the resurgence of the retail craze has not infected the broader stock markets. The blue-chip S&P 500 Index and the Nasdaq Composite closed 0.5% and 0.8%, respectively, in New York City, after trading in a narrow range in recent sessions.
“There have been these little mini-fires all over the forest, but they have yet to lead to a larger forest fire,” said Maneesh Deshpande, head of US equity strategy at Barclays. “It’s worrying, but it’s not a macro event.”