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05 Feb 2021
3 min read

GameStop Share Price Unwinds, US Equity Futures Point Higher

GameStop Share Price Unwinds, US Equity Futures Point Higher

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Key Takeaways

  • GameStop shares slide 42% on Thursday
  • Financial regulators review recent trading practices

GameStop shares continued their decline for a third straight session on Thursday. The stock closed at $53.50, down 83% from Monday’s opening price of $316. GameStop shed another 42% on Thursday and closed near session lows as the wild gyrations of the stock have receded. Adding to the downside pressure is the recent federal scrutiny that has overshadowed the investors’ buying spree.

Having touched a record high of $483 on Jan 28, GameStop shares are down 88% to the current market price. GameStop premarket trading shows the stock is bound to open lower by roughly 5% to 8% and dip below $50 a share. The stock is on track to snap a three-week winning streak as the shares of the videogame retailer continue to depreciate.

The “meme-stock”, or as Tesla’s Elon Musk called it, “Gamestonk”, drew the attention of regulators who gathered yesterday to discuss the extraordinary volatility and the risks involved for the participants. Treasury Secretary Janet Yellen met with the heads of the SEC, CFTC, and the Fed on Thursday. The top regulators reviewed whether investing in highly volatile assets is “consistent with investor protection and fair and efficient markets”.

The Regulatory Implications Behind the GameStop Saga

The discussion between the top financial regulators was focused on the functioning of the financial markets and the developments in the GameStop story, which increased tension between investors and some brokers who had restricted long positions in the videogame company for a period of time.

“The regulators believe the core infrastructure was resilient during high volatility and heavy trading volume, and agree on the importance of the SEC releasing a timely study of the events,” a Treasury Department statement said. The statement also highlights the fact that the Secretary of Treasury “believes it is imperative to uphold the integrity of these markets and ensure investor protection”.

Regulators will be seeking to make sure that investors are protected in an environment where retail traders collaborate and plan their moves on social media since this could interfere with the financial markets’ price discovery.

The other stock which captivated the public’s attention, AMC, also closed down on Thursday, lower by 20.96%. The movie theater chain closed at $7.09, down 47% so far this week. Similar to GameStop, AMC is on its way to snap a three-week string of gains.

As the noise around the GameStop saga settles down, the US markets continue on their way to a fifth straight session in green territory. Investors this week appear optimistic towards equities as Washington signals confidence that the $1.9tn stimulus package is in the making and President Biden could be able to pass it without bipartisan support. House leaders are meeting with President Biden today to discuss non-binding amendments to allow the Democrats to pass the relief package without support from the

Republicans. US equity futures indicate a higher open today. Before the opening of the US trading session, investors will be monitoring the release of payroll data and unemployment rate for January.

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