5 Reddit’s WallStreetBets Stocks That are Tumbling

4. GameStop Corp. (NYSE: GME)

Number of Hedge Fund Holders: 13 

Percentage Losses Over Last Five Days: 5.80%

GameStop Corp. (NYSE: GME) is a Texas-based retailer of gaming and entertainment products. It is placed fourth on our list of 10 Reddit’s WallStreetBets stocks that are tumbling. The firm has a market cap of over $11 billion. The short interest on the stock is more than 13%. The stock has been hit in recent weeks amid media reports that streaming giant Netflix is planning a blockbuster entry into the world of video gaming. Investment advisory Citi has already termed the development a threat to existing video game firms. 

On June 10, investment advisory Wedbush maintained an Underperform rating on GameStop Corp. (NYSE: GME) stock but raised the price target to $50 from $39, noting that the share price of the firm was completely disconnected from basic business fundamentals. 

Out of the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Citadel Investment Group is a leading shareholder in GameStop Corp. (NYSE: GME) with 3.2 million shares worth more than $620 million.  

In its Q1 2021 investor letter, Rhizome Partners, an asset management firm, highlighted a few stocks and GameStop Corp. (NYSE: GME) was one of them. Here is what the fund said:

“The first quarter saw some bizarre market reactions. Game Stop is a heavily shorted legacy video game retailer that saw its stock price rise from $17 to a peak of $483 within a month. It appears that retail investors on a Reddit.com forum called WallStreetBets used memes to create a viral feedback loop of forced buying. Game Stop reached $20 billion in market cap and had more daily trading volume than Apple at one point. The Game Stop short squeeze became a black swan event for the short sellers. Large hedge funds such as Melvin Capital suffered 50% losses during a short period and required emergency capital injections that resulted in costly dilution. Shorting is difficult and introduces a risk of ruin. This is especially true in situations where a large percentage of the float is shorted. We want to remind you that we hedge our portfolio via index puts, sector puts, and sometimes buying puts directly in our own portfolio companies. However, we rarely short because 1) we are not good at it 2) the potential for brain damage is too high and 3) we want to avoid the risk of ruin.”