GameStop – 1 year on

By Samuel Indyk

Investing.com – It’s been exactly one year since GameStop (NYSE:GME) became the talk of the financial markets when its shares started rallying amid a surge of interest from retail traders.

On 11^th January 2021, GameStop shares rose 12.7%, touching $20 per share. By the end of the month, GameStop had gained 1,600%, reached $483 per share, and the term “meme stocks” was born.

Throughout January 2021, GameStop had daily gains of 27%, 51%, 57%, 69%, 93%, and 135% on different trading days.

However, the party would not last and GameStop started February with back-to-back daily losses of 31% and 60%. By 19^th February, GameStop was trading as low as $38.50 per share.

Since then, the highest print for GameStop was $348.50 on 10^th March.

The videogame retailer closed yesterday at $131.15.

The unusual trading activity began when an army of retail traders, most from Reddit’s /WallStreetBets forum, clobbered together and decided to buy shares, prompting what has been described on the forum as the "mother of all short squeezes" or MOASS for short.

And it wasn’t just GameStop that was caught up in a trading frenzy. Cinema chain AMC Entertainment (NYSE:AMC) began 2021 trading at $2 per share before a 300% increase on 27^th January took the share price above $20.

That wasn’t the end for AMC. As the US economy began to reopen in the summer following the COVID outbreak at the start of the year, shares rose to a high of $68.80 in June, again helped by support from an army of retail traders.

AMC shares closed yesterday at $22.78.

The wild swings in price fundamentally changed how some long-term investors and short sellers viewed the market.

Citron Research, one of the more famous short sellers, said it would discontinue short selling research following the GameStop saga. The firm was forced to cover most of its GameStop short position at a 100% loss.

According to UK investment platform interactive investor, GameStop was the most bought stock among customers in the 18-24 and 25-34 age categories. GameStop was the sixth most bought stock in the 35-44 age category but the popularity of the stock waned with age.

It was a similar story with AMC, ranking fifth, fourth, and eighth among the 18-24, 25-34, and 35-44 age categories, respectively.

Richard Hunter, Head of Markets at interactive investor, issued a note of caution to those just willing to invest due to what they read on social media.

“As with any investment or indeed trade, investors should research the company and understand its business before committing capital, as opposed to surfing a buying wave which may – or may not – have any merit,” Hunter said. “Equally, social media posts should be cross checked with the latest information available on the company for a balanced view.”

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Whatever your view on the whole episode, whether you think it was a good or bad experience for financial markets, one thing that everyone can agree on is that there's a new element for traders to consider when thinking about trading and investments: an army of retail traders that won't always trade based on fundamentals.