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 sparked 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 red-hot meme stock, Clover Health, which was the focus of the WallStreetBets messageboard this week, retreated 10% on Thursday. Clean Energy Fuels, which rose more than 31% on 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 – by finding out for the first time that the one-day trading volume of each stock had at least its 30-day trading volume. Movement doubled the average of traded stocks. 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. It also selected another Amazon veteran, Mike Recupero, to be its chief financial officer. 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 chain, 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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