The much talked about GameStop stock on NYSE has given up its premarket gains and turned negative falling as much as 14 percent.

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In premarket, the stock touched $500 briefly. It is noteworthy that the stock was worth $40 a piece only a couple of weeks ago. The stock has rallied 130 percent on Wednesday pushing its week-to-date gains to 466 percent.

GameStop is a videogame hardware and software company and was doing badly on the stock exchanges before the pandemic and did disastrously through 2020.

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So why the rally? Well, a section of retail day traders who frequently populate Reddit boards, decided so. This was because a couple of hedge funds revealed they were short on the stock to the tune of $55 million: that is they would profit from a fall in its price.

The rally in these shares—as much as 800 percent in the case of GameStop—has resulted in severe financial losses to many reputed money managers, who short-sold the stocks thinking they were overpriced.

Trading in GameStop stock was halted for volatility nine times on Monday and five times on Tuesday.

One of the two major investors that surrendered, Citron Research, acknowledged Wednesday in a YouTube video that it unwound the majority of its bet that GameStop stock would fall. Andrew Left, who runs Citron, said it took “a loss, 100%” to do so, but that does not change his view that GameStop is a loser.

(Edited by : Abhishek Jha)

First Published:Jan 28, 2021 8:04 PM IST