GameStop’s stock price dropped over 16% on Wednesday, even though the company announced a $2.1 billion investment. The shares of the popular game retailer, which has a strong following on Reddit, fell sharply in afternoon trading.
This decline followed a turbulent few days where the stock had soared to nearly $47 per share last week before ending the trading day at $25.46.
GameStop Stock Volatility and Citron Research’s Exit
The day’s trading was particularly volatile, with GameStop’s stock rising to a high of $33.50 on Wednesday morning before losing more than 16% of its starting price by market close.
The plunge coincided with renowned short-seller Citron Research announcing that it was giving up on its short position on GME. Citron, which lost billions during GameStop’s headline-grabbing rally three years ago, stated, “We respect the market’s irrationality.”
Citron founder Andrew Left had only confirmed his firm’s renewed short positions last week, telling Reuters that while it wasn’t as large as it was in 2021, “it’s fun to go back into the fire.” Despite what he described as GameStop’s “deteriorating financials,” his firm tweeted its capitulation earlier today.
GameStop Stock Drop and Renewed Interest from Roaring Kitty
Today’s drop in GameStop’s stock price came despite the company’s announcement that it had raised $2.1 billion from its 75-million-share at-the-market equity offering.
“They have enough runway to appease their cult-like shareholders,” Citron Research observed.
The return of famed meme stock advocate Roaring Kitty, also known as Keith Gill, last month has sparked renewed interest in GameStop. Gill later revealed that he has taken a substantial position in $20 call options for GameStop, betting that its stock will be worth more than $20 on June 21.
According to CNBC, calls with the same expiration and strike price traded more than 93,000 times in the final hours of the day, well above their 30-day average volume of about 10,000. However, the price of Roaring Kitty’s calls dropped more than 40% as the price of GameStop stock fell more than 16%.
GameStop’s Rollercoaster Ride and Roaring Kitty’s Return
GameStop shares became the focus of a short squeeze orchestrated by retail investors in 2021, leading to significant losses for hedge funds and institutional investors with short positions. Roaring Kitty, a key figure in this stock market turmoil, played a pivotal role that eventually prompted investigations and congressional hearings in Washington, D.C.
Earlier this month, speculation circulated about Roaring Kitty’s comeback after years away from public attention. This news caused GameStop shares to surge dramatically, only to decline following the highly-anticipated livestream event.
Important: Please note that this article is only meant to provide information and should not be taken as legal, tax, investment, financial, or any other type of advice.
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