(Bloomberg) — The meme rally that added about $11 billion in value to GameStop Corp. and AMC Entertainment Holdings Inc. faltered on Wednesday, erasing much of the gains in the first minutes of trading.
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GameStop fell as much as 33% on Wednesday, the biggest intraday drop since March 2021. AMC fell as much as 26% after the beleaguered movie theater chain took advantage of its shares rallying thanks to a private deal to reduce its debt. Shares more than doubled in the first two days of the week, before Wednesday’s plunge wiped out more than $4 billion in market value between the two.
The latest rout echoes the meme craze that gripped markets in early 2021. Then, GameStop soared more than 1,000% in a matter of weeks before quickly paring much of the gains. The stock oscillated for months, never fully regaining its early highs, before the retail madness finally dissipated.
The conditions that caused stock prices to surge then are no longer present, so this time around the rally may not last as long, said Ben Laidler, global markets strategist at eToro.
“This time it’s different,” he said. “The confinement due to the pandemic is over. Excess consumer savings have largely been spent for a long time. Short positions in these stocks are much smaller but not small. Interest rates are much higher.
AMC said in a statement Wednesday that it would issue shares to reduce about $164 million of its debt in a private deal valuing the stock, based on exchanged principal and accrued interest, at $7 .33 dollars per share. On Tuesday, the company announced that it had completed a stock offering to raise approximately $250 million, selling 72.5 million shares at an average price of $3.45 per share. The stock ended last week at $2.91 and closed Tuesday at $6.85 after a two-day rise.
Read more: AMC takes advantage of Meme’s stock market momentum to reduce $164 million in debt
Social media posts this week from Keith Gill, who drove 2021’s meme stock mania under the nickname “Roaring Kitty,” were an effective spark for this latest rally. Gill rose to fame that year by rallying day traders on Reddit in an effort to squeeze GameStop short sellers.
Traders who bet on some of the most shorted stocks are racking up big paper losses. Meanwhile, options activity on GameStop continued to increase on Tuesday, with total trading volume reaching its highest level since 2022 and nearly 820,000 contracts traded.
AMC and GameStop were among the top 10 stocks bought by retail investors on Tuesday, with $51 million and $16 million in daily inflows, respectively, said Giacomo Pierantoni, head of data at Vanda Research.
This week’s rally also boosted other high-risk, heavily shorted stocks, as traders looked to stocks beyond GameStop and AMC. This week’s big winners include SunPower Corp. and Virgin Galactic Holdings Inc., both of which fell Wednesday.
–With help from Bailey Lipschultz, Michael Msika and Claire Boston.
(Trading updates.)
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