GameStop Corp shares halved in value on Tuesday and silver prices retreated as the Reddit-driven trading frenzy that has shocked global financial markets appeared to fizzle, at least for now.
The videogame chain's shares, which have seesawed wildly with hedge funds and other investors making or losing billions of dollars, were last down 51% at $108.99. They are now worth only a quarter of their high of $483 last week.
Early on Tuesday, short sellers were up $2.5 billion in paper gains, cutting their year-to-date losses to $10.1 billion, according to S3 Partners.
Other so-called meme stocks caught up in the Reddit rally also sold off. AMC Entertainment Holdings Inc, Express Inc, Naked Brand Group Ltd and Koss Corp each dropped by about a third, while BlackBerry Ltd and Bed Bath & Beyond Inc showed double-digit percentage losses. Nokia's U.S.-listed shares fell 8%.
"The rally is likely over (since) the short positions are pretty well taken care of," said Paul Nolte, portfolio manager at Kingsview Asset Management in Chicago.
"That's the game you play when you do this thing. It can work for a while until it stops working and when it stops working, it reverses pretty quickly."
Spot silver prices, an alternative focus in the battle between a pack of small traders and Wall Street hedge funds, fell more than 7% after hitting an eight-year high on Monday. The main silver ETF was down 7% in early trading.
The retail frenzy in silver has left some dealers scrambling for bars and coins to meet demand.
Analysts said the silver pullback may show the limits of small investors' impact in a large market, while posts on the popular Reddit forum WallStreetBets ranged from those giving up on the GameStop trade to calls to stick with the stock.
Online broker Robinhood, on whose platform much of the buying and selling has taken place, raised trading limits on GameStop Corp, AMC and other stocks, according to an update on its website on Tuesday.
Analysts predict that the market action, which has drawn the attention of regulators and politicians, was likely to fade, and said it was just a question of how soon.
"This is a pretty narrow strategy that likely creates some bizarre situations like GameStop and AMC but it's not broad enough to change how institutional investors are going to invest," said Rick Meckler, a partner at Cherry Lane Investments, a family investment office in New Vernon, New Jersey.
"The strength of the move was so severe that it really opened up people's eyes to the power of social media in the investment world. But having seen it and how short-term the nature of it is, I think it'll lose its surprise. Can already see it with silver."
Robinhood's app recorded more downloads than any other U.S. trading app last week despite concerns about its restrictions on transactions involving some heavily shorted stocks.
The GameStop saga is likely to expedite a regulatory review of the role non-bank firms play in markets, experts said.
GameStop, AMC, Koss, BlackBerry and Bed Bath & Beyond did not immediately respond to requests seeking comment on Tuesday.
Broader markets appeared to be moving on and U.S. stock indexes built on the previous session's momentum. Wall Street's fear gauge retreated.
In London, a sign of still-strong demand came from online greeting-card retailer Moonpig, whose shares leapt 21% in their debut on Tuesday, while emerging markets research house Tellimer named Ping An Insurance and Tencent as ripe for a short squeeze in Asia.
Tesla Inc billionaire entrepreneur Elon Musk, whose candid tweets about certain companies helped send shares soaring last month, said he was taking another break from Twitter.
CME RAISED SILVER MARGINS
One big drag on silver prices was a Chicago Mercantile Exchange margin hike on contracts for the metal, which makes speculative trade more expensive.
Mining stocks including First Majestic Silver and Pan American Silver fell.
"It is slowing down a bit," said Gregor Gregersen, founder of Silver Bullion, a dealer in Singapore, after a wild 24 hours in which he said sales exceeded average monthly levels from 2018 and orders above S$35,000 ($26,300) arrived every three minutes.
Hedge funds raised their bets against Canadian silver-mining stocks, January short-selling data from a market regulator showed.
In interviews with more than a dozen digital brokerage users, Reuters found a younger generation that approaches trading much differently than the "suits" of Wall Street. As a result, retail traders and professionals may be tempted to turn the tactic of squeezing short positions into a full-blown investment strategy.
Some Redditors, meanwhile, stuck to their guns.
"WHO IS HOLDING GME WITH ME?" read one top post. "I'M HOLDING EVEN IF MY PORTFOLIO GOES DOWN TO ZERO," read another.