GameStop (NYSE: GME) stock plunged almost 20% in intraday trading Wednesday, signaling a wane in the rally of meme stocks. The video game retailer’s stock had experienced a rapid surge over the past two days due to a short squeeze, soaring over 180% amid frequent trading halts due to high volatility.
AMC Entertainment (AMC) also took a sharp downturn on Wednesday, plummeting by 20%, following a remarkable 95% surge over the past two days.
Other heavily shorted stocks, including SunPower Corporation (SPWR), Beyond Meat Inc. (BYND), and The Children’s Place Inc. (PLCE), also saw declines on Wednesday.
Keith Gill, famously known as “Roaring Kitty,” has partly fueled the resurgence of meme stock activity with his return, reigniting the bullish stance on GameStop that sparked the meme stock frenzy in 2021.
Experts Commentary on Latest Meme Stocks Rally
Nicholas Colas, co-founder at DataTrek Research, likened the recent trading action to the events of early 2021, stating that it feels like an echo of the past when an account, presumably referring to Keith Gill’s, helped drive a vicious short squeeze in GameStop.
While the recent rally has drawn comparisons to the events of 2021, Colas noted that the scale is relatively smaller this time around. In January 2021, the stock of GameStop (NYSE: GME) soared by 1,500% before relinquishing most of those gains.
Despite the pain experienced by short sellers during the original meme stock rally three years ago, bets against these companies have persisted. Since the 2021 rally, investors have maintained a high short interest in GameStop, shorting almost 24% of its float, S3 Partners data reveals.
According to Ihor Dusaniwsky, managing director of S3 Partners, the current surge in meme stock activity is driving further short-covering.
On Tuesday, Wall Street strategists warned that the recent enthusiasm is unlikely to reach the levels seen in 2021. The meme stock frenzy of 2021 gained national attention, attracting numerous retail traders during the pandemic lockdowns.
Tom Sosnoff, CEO of Tastylive, expressed that he does not view the current situation in the same light as 2021, describing it as less transformative.
In his words,
“I don’t look at this at all like I did in 2021 when it was almost a transformational moment, dragging, you know, tens of millions of people back into the marketplace.”
Meanwhile, YouTuber Matt Kohrs, a previous GameStop and AMC stakeholder, reaffirmed on Tuesday that the 2021 short squeeze scenario of “the small investor battling the large investor” remains relevant.
Kohrs stated,
“The perception is that the entire system is set up and insulated to benefit the powerful elite. GME is the symbol of the populist movement against that concept.”
He added,
“The only true change I see from a psychology standpoint is not being locked inside anymore.”
GameStop (NYSE: GME) Stock Movement
GME stock plummeted 18.87% to close at $39.55 on Wednesday. Its value increased by 148.43% this week. Trading activity has witnessed 128,901,404 (128.90 million) shares changing hands, well above the average daily volume of 13.35 million.
