Retailer holdout concept stocks extended their losses as the U.S. Congress and regulators are accelerating their investigations amid signs that short sellers are beginning to close out their positions and the short-selling momentum is receding.
In the pre-market Tuesday on U.S. stocks, concept stocks in WallStreetBets (WSB), the Reddit subforum for U.S. retail investors, extended their losses, with GameStop (GME) down more than 40%, AMC Theatres down more than 30%, Koss Electronics (KOSS) down more than 25% and Naked Brand down nearly 20%.
On Tuesday, GME jumped more than 37% lower on the day, and the U.S. stock fell below the $100 mark in early trading, once falling below $75, with the largest intra-day drop of 67%, and the market value once evaporated $28 billion during the day. During Tuesday’s session, GME suspended trading more than once due to the meltdown triggered by the plunge, and the drop was still more than 40% after resuming trading. As of Tuesday’s session, GME shares have retracted 85% of the cumulative gains in January this year.
AMC opened nearly 29% lower and had fallen nearly 55% in early trading, KOSS fell nearly 50% when it set a new daily low in early trading, Naked Brand (NAKD) had fallen nearly 48% in early trading, and Express (EXPR) was down more than 40% at one point.
Silver and biotech stock BioCryst Pharmaceuticals (BCRX), which has recently become a new target for retail short sellers, also retreated sharply after surging on Monday.
BCRX rose nearly 9% at the beginning of Tuesday’s session, but quickly turned lower, falling more than 20% at one point in early trading.
COMEX silver futures extended losses to 10% in midday trading Tuesday. Monday closed up more than 7% of the world’s largest silver ETF SLV fell more than 8% during the day. Monday are double-digit gains in U.S. silver stocks, Avino Silver &Gold Mines (ASM) fell more than 27%, First Majestic also fell more than 20% intraday, Pan American Silver (PAAS) fell more than 10%.
Intense regulatory action on the horizon as the short-selling spree subsides
IHS Markit data released on Monday showed that the proportion of GME short positions to GME free float fell sharply to 39% from 114% in mid-January; S3 Partners data showed that the size of GameStop short positions had fallen to the equivalent of about 50% of the number of free float, with a peak level of about 140% earlier in January this year.
Tuesday’s media said that after the dust settles from the market turmoil GameStop (GME) and silver set off earlier in the year, U.S. lawmakers are bound to look more closely at mobile apps, short selling regulations and processes to ensure brokers are solvent; social media will also be among the investigations, with a focus on how Reddit forums and Twitter were used to motivate large numbers of investors to take concerted trading action. The SEC will soon be busy investigating market manipulation issues.
The media also noted that the U.S. House Financial Services Committee has scheduled a hearing for Feb. 18 that could include testimony from government regulators and companies such as Robinhood, an Internet brokerage firm.
In addition, Robinhood, a brokerage platform favored by retail investors, has further eased restrictions on trading stocks such as GME, allowing users to buy up to 100 shares. Other brokerages have yet to further ease trading. App Cash, the payment service of Square, the U.S. version of Alipay, said its clearing broker Axos suspended trading in individual stocks GME, AMC and Nokia on Tuesday, which was not the company’s decision, and hoped to resume the service for users to buy the relevant stocks as soon as possible.
Commenting on Tuesday’s market performance, some analysts said it looked like the shorting was unraveling and that stock prices would begin to start reflecting the reality of economic conditions again.
Recent Comments