GameStop Extends Rout as Results Further Weaken Meme Rally

(Bloomberg) — GameStop Corp. shares headed for a third day of declines, paring the meme-fueled rally that had sent the stock flying at the start of the week.

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The shares plunged as much as 20% in premarket trading after the company filed a mixed-securities shelf and reported a drop in preliminary first-quarter net sales. The stock had soared 179% in a two-day frenzy before going into a sharp reverse. AMC Entertainment Holdings Inc., which had joined in the week’s volatility, fell 8.8% in early Friday trading.

GameStop said its preliminary first-quarter net sales were between $872 million and $892 million, compared with $1.237 billion in the year earlier period.

Friday’s moves came as the trading intensity that powered this week’s rally eased significantly. “Retail investors’ purchases of GME and AMC have seen a significant decline,” said Giacomo Pierantoni, head of data at Vanda Research.

While GameStop experienced about $5 million in inflows over the last two days, inflows into AMC were “nearly non-existent” on Thursday, he said.

The return to social media by “Roaring Kitty,” the online moniker of Keith Gill that fanned the retail buying frenzy in 2021, ignited the latest rally. The high volatility and heavy options activity gave Wall Street investors flashbacks of early 2021, when retail traders bet on the video game retailer and beleaguered movie theater chain and propelled both stocks to record highs.

However, conditions are not the same this time around. Options activity for GameStop has declined, while activity around AMC shares has more than halved from Monday’s peak.

“It appears to me that the mini bubble is collapsing,” said Pierantoni. “When flows deviate from an exponential growth pattern and decline rapidly, it indicates that sentiment is quite fragile.”

–With assistance from Michael Msika.

(Updates with latest trading and GameStop news.)

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