Shares of GameStop continued to lose ground before the bell on Tuesday, with shares of the volatile retail trader favorite sliding more than 40% to $135 per share in premarket trading.
The tumble follows a more than 30% drop during the regular market session Monday. If GameStop opens at these levels, that will bring its two-day slide to about 59%.
GameStop's shares have traded wildly in recent weeks after retail traders on Reddit sparked a short squeeze in the stock, a phenomenon where traders who had bet against the stock are forced to buy it to limit their losses, pushing the price even higher.
Short interest in GameStop as a percentage of shares available for trading dropped to about 53% from over 110% a week ago, according to data from S3 Partners.
"Both fundamental and momentum short sellers have found opportunities and price exit points to trim their positions in the face of these losses as the GME short squeeze is in full force," said Ihor Dusaniwsky, S3 managing director of predictive analytics.
The recent covering pared short sellers' losses in the name to about 13.4 billion year to date, from nearly $20 billion just last week amid the stock's remarkable pop, S3 data showed.
The retail activity has helped fuel extreme volatility and high trading volume in GameStop and other stocks. However, Monday's trading volume was the lowest in the video game stock since Jan. 20, according to FactSet.
AMC Entertainment, another favorite of retail traders, was also falling before the bell. The movie theater stock dropped more than 30% after squeaking out a gain of less than 1% during Monday market hours.
GameStop's struggles came even as free trading brokerage Robinhood eased back on the restrictions it placed on highly volatile names. The brokerage allowed users to buy up to 20 shares of GameStop as of Monday afternoon, up from just one share at the beginning of the day and four shares around noon ET.
The volatile moves and brokerage restrictions have garnered attention from politicians and regulators in Washington. The Chairwoman of the House Committee on Financial Services, Rep. Maxine Waters, D-CA, announced on Monday that there would be a hearing on Feb. 18 about the recent trading in GameStop.
— with reporting from CNBC's Yun Li.
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February 02, 2021 at 06:11AM
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GameStop shares fall another 40%, lose more than half their value in two days - CNBC
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