GameStop shares spiked Wednesday, reaching $348 apiece, only to come crashing down to $172 each early in the afternoon, causing multiple halts in trading of the stock due to volatility. Stocks then moved back up and ended the day at $265, a 7% increase for the day.
The past two days were a buying frenzy for the video game retailer's stock since Monday, when it was $136. That surge coincided with a lift to the entire stock market after Saturday's passage of the COVID relief bill in the Senate, as well as with an announcement that the video game retailer is developing a new e-commerce strategy, with Chewy.com founder Ryan Cohen heading that effort.
Cohen, who made a large investment in GameStop last year, will lead a committee seeking to transform GameStop into a "technology business," the company said in a press release Monday.
GameStop shares skyrocketed from less than $20 in early January to more than $480 at the end of January thanks to a massive push by traders on the Reddit forum r/WallStreetBets. The stock price has dropped dramatically since then.
Shares moved back up a bit in late February following news that Jim Bell, the chief financial officer, is resigning. Bell didn't leave the company willingly, according to Business Insider, and was reportedly pushed out by the board.
The Senate Banking Committee held a hearing Tuesday to discuss recent GameStop volatility and the "gamification" of trading by popular investing apps like Robinhood. There are concerns that zero-commission brokers contribute to the volatility of the market and give inexperienced people access to risky trading options.
Sen. Elizabeth Warren, a Democrat from Massachusetts, said Tuesday she received responses from the Security Exchange Commission and the Financial Industry Regulatory Authority about the role hedge funds played in GameStop stock price surge in January. One reason the Reddit community began buying the retailer's shares was due to a large number of short sells, which is a bet investors do when they think a stock will go down. Traders on Reddit bought GameStop stock and increased its share price, leading to a "short squeeze," when hedge funds that bet against the retailer were forced to buy the stock in order to avoid large losses. The SEC and FINRA say they are evaluating changes to the rules regarding the practice.