GameStop tumbles nearly 20% as Reddit-fueled party winds down

GameStop, the struggling video game retailer at the center of a Wall Street frenzy last month, is losing stream.

The stock was down nearly 20% to $48.79 a share on Tuesday, a sign that the party was winding down for retail investors who drove GameStop to record highs last month. Last week, the stock tumbled more than 80%.

Shares soared around mid-January after the Reddit community WallStreetBets rallied around GameStop, saying it was undervalued and triggering a buying spree. The Reddit-fueled rise accelerated as short-sellers — investors who bet the stock would fall — were forced to buy up shares to cover their positions.

The so-called short squeeze wreaked havoc on Wall Street hedge funds were major short-sellers of the stock, including Melvin Capital, which lost 53% in January. Melvin secured a more-than-$2-billion bailout from Ken Griffin’s Citadel and Steve Cohen’s Point72 to help shore up its finances.

Stock-trading app Robinhood and other brokers placed temporary bans on trading in GameStop and a dozen other red-hot Reddit favorites, creating a a backlash among individual investors.

Since then, Treasury Secretary Janet Yellen has been meeting with federal regulators to examine the frenzy and ensure “recent activities are consistent with investor protection and fair and efficient markets.” It still remains unclear if any new policy decisions or regulations are to come.

In a Reddit thread about GameStop on the WallStreetBets forum on Tuesday, a flood of users chimed in on the stock’s performance. Many appeared to be unfazed by the stock’s drop.

One user posted, “We already took off one time, anything is possible.” Another Reddit user wrote, “Forget the short squeeze, I’m in this for the earnings call.”

GameStop is scheduled to release its fourth-quarter earnings on March 25.

Other Reddit darlings such as AMC and BlackBerry also tumbled Tuesday.