GameStop and AMC Extend Slump as Meme-Fueled Rally Unravels

(Bloomberg) -- GameStop Corp. and AMC Entertainment Holdings Inc. slumped for a second day as the meme-stock frenzy that gripped markets earlier this week faltered.

GameStop fell 30% on Thursday and AMC dropped by 15%, paring this week’s massive gains. Meme traders had bid up the stocks for two days, before the momentum faltered on Wednesday and the ensuing tumbles erased about $7 billion of the roughly $11 billion of market value they’d gained.

“In stocks like this that there’s no fundamental underpinning, they can’t stay elevated without people constantly coming in,” said Tuttle Capital Management Chief Executive Officer Matthew Tuttle. 

The volatility recalls the heyday of meme stocks in early 2021, when retail traders latched onto the video game retailer and beleaguered movie theater chain and sent both stocks to record highs. Keith Gill, operating under the online moniker “Roaring Kitty,” shot to fame in 2021 as he rallied traders on Reddit around GameStop. A Sunday post from his account on X helped launch the latest bout of volatility.

Read more: What to Know About the Fading Meme Stock Sequel: QuickTake

This week’s swings jarred short sellers, but have been fairly muted compared to the fireworks of 2021, when GameStop soared by more than 1,600% that January. It has yet to reclaim the high watermark shares set then.

“Coming out of Covid, all you heard was HODL, diamond hands. I think that’s all gone,” Tuttle said. “They’re smarter, they know how to trade this stuff.”

The video game seller isn’t expected to turn a profit until the holiday quarter, according to analyst estimates, and now trades at more than 1,000-times its expected 12-month forward earnings, according to data compiled by Bloomberg.

AMC has cashed-in on the surge, announcing it had completed a previously announced at-the-market equity offering and that it had reached a private deal to swap shares to reduce its debt.

Read More: Will GameStop Cash In on the Meme Stock Rally?: ECM Watch

“Valuations remain artificially inflated, but these sharp one-day moves stand as a reminder of the dangers of engaging in speculative trades,” said Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown.

--With assistance from Matt Turner, Bailey Lipschultz and Philip Sanders.

(Updates stock moves and chart.)

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