Day of reckoning for the Reddit brigade: Gamestop shares plunge and silver slammed into reverse as rebel investors run out of puff
Shares in Gamestop plunged and silver slammed into reverse as rebellious retail investors on Reddit ran out of puff.
The wild run of trades driven by punters in Reddit chatrooms has shocked the financial mainstream over the past week but signs are that the frenzy has fizzled out.
The rebels’ favourite stocks all sank yesterday, including Gamestop, down 60 per cent, AMC Entertainment, off 41 per cent, and Blackberry, which lost 21 per cent.
Reddit and weep: Shares in Gamestop plunged and silver slammed into reverse as rebellious retail investors on Reddit ran out of puff
The declines wiped billions from the pumped up valuations of the three companies.
Silver tumbled more than 9 per cent after surging to an eight-year high earlier this week.
The falls have been triggered by retail investors deciding to sell their stocks as confidence waivers, with market analysts pointing out that the momentum had collapsed.
‘This was bound to happen – it goes back to the age-old premise that the stock market ultimately at the fringes is driven by greed and fear,’ said Mike Mullaney, director of global markets research at Boston Partners.
The Reddit rebels have captivated global markets, overwhelming hedge funds around the world as day traders grouped together to drive a furious rally in unloved stocks heavily bet against by Wall Street.
Their tactics of buying and holding stock caught money managers off guard and forced them to sell off their short positions before losses became too great.
But now posts on Reddit’s WallStreetBets forum, that last week was full of bragging, have started to fill up with tales of heavy losses as individuals sold stock.
Others who had invested for the first time demanded to know why the stock prices were falling.
Jordan Belfort, who was jailed for market manipulation in 1999, and who inspired the film, The Wolf Of Wall Street, warned amateur investors that they ‘could lose everything’. Such investments could be ‘great on the way up, but painful on the way down’.
He added that he sympathised with the small-time traders drawn to Gamestop, many of whom wanted to turn the tables on big Wall Street firms.
He told the BBC: ‘If you are looking at this as a way to make your living, you’ll have to catch a falling knife on the way down. I would urge people to take their chips off the table.’
But the rebellious spirit in the chatrooms lives on, with some repeating the mantra to ‘hold the line’ and telling investors who had piled into Gamestop not to sell.
Another said: ‘Guys. This only works if we work together. Buy the dip and hold. For all of us. The movement isn’t over. Balls of steel…’
Some established traders cautioned that the retail rebels will be back and hedge fund managers should remain on their guard.
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