Retail investors who piggybacked on a rally in a clutch of stocks including GameStop are nursing heavy losses as shares have come crashing back to earth.
What began as a planned so-called “short squeeze” on the consoles retailer, orchestrated by traders on the Reddit message board r/WallStreetBets, quickly spiralled into a frenzied rally in a number of shares that stung hedge funds betting on declines. Billionaires such as Chamath Palihapitiya, Mark Cuban and Elon Musk all weighed in on the fervour.
But by the end of Thursday, more than $36bn has been wiped from the valuations of the five main companies whose shares rocketed higher at the end of January. The fallout from one of the wilder trading episodes of the past decade underscores the risks faced by inexperienced traders armed with no-fee trading and slick brokerage apps.