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GameStop shares fall more than 40% as prominent booster draws inquiry

Reddit's WallStreetBets hit by bots
Reddit group WallStreetBets hit by bot activity 05:49

GameStop shares came under renewed pressure on Thursday, falling more than 40% to just under $54 as the video game seller continued to slide after a social media-driven frenzy drove its stock up nearly 3,000% since early January.

Shares of GameStop — which on January 28 were riding high at $483 apiece — are down nearly 90% over the last week. The unusual plunge has lopped more than $30 billion off the company's market value. 

The stock had soared in late January especially, after amateur investors on Reddit discussion board WallStreetBets piled into the shares, with some traders declaring war on Wall Street hedge funds that had bet against the company. The forum has exploded in popularity in the past week, swelling to 8 million members.

CBS MoneyWatch reported on Monday that the moderators of WallStreetBets had recently detected a "large amount" of bot activity in the stock-recommendation content being posted to its group.

GameStop, Reddit and the Battle of Wall Street 04:22

The GameStop tumble followed a large reduction in short interest on the stock, which measures how many of the company's shares have been borrowed to sell. Many had pointed to that previously high level of short interest, and the fact that hedge funds and others betting against the video game retailer had been squeezed, as a reason GameStop's shares had soared.

The drop in GameStop shares could result in significant losses for some of the individual investors who had ridden the positive stock market suggestions posted on WallStreetBets. Keith Gill, the Reddit trader who claimed he made tens of millions of dollars leading the push to invest in GameStop — lost $13 million on Tuesday.

Gill now faces an inquiry from a Massachusetts state regulator over potential conflicts of interest because of his work as a licensed securities broker and "financial wellness education director" for insurance company MassMutual. The regulator's letter to MassMutual was first reported by the New York Times.

MassMutual told the office of Secretary of the Commonwealth William Galvin that it had previously denied a request from Gill to engage in outside business activity. His last day at the job was Jan. 28.

Doubts emerged about GameStop and its online boosters this week as the stock plunged, spelling trouble for novice investors who got in too late, bought too high and found themselves caught up in an epic made-for-Hollywood story of battling against the 1%.

"I was a little late to the game," said Will Binette, 21, of Albuquerque, New Mexico, who bought one share of GameStop last week when it was $380. "I don't really care that I'm losing that much money. It's about sending a message and redistributing the wealth."

Robinhood facing backlash amid GameStop trading frenzy 06:33

The share prices of other companies that have gotten boosterish mentions in WallStreetBets have also suffered steep drops. Shares of movie theater chain AMC Entertainment fell 20% on Thursday to $7. That stock, which also fell 40% on Tuesday, had been as high as $20 last week. BlackBerry's shares, which had climbed to $28 last week, were $12.15.

Treasury Secretary Janet Yellen meet with financial regulators on Thursday to discuss the GameStop mania and its impact on investors and the broader markets. 

The acting chairwoman of the U.S. Securities and Exchange Commission, Allison Herren Lee, told NPR on Monday that the stock market regulator is looking into different aspects of the sudden rise in GameStop shares, including whether brokers acted appropriately and whether there had been any market manipulation. 

—The Associated Press contributed to this report.

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