GameStop’s retreat has coincided with a sharp reduction in short interest after bearish investors appeared to cover their positions. That has loosened a squeeze on the stock caused by day traders who used Reddit forums to tout and bid up out-of-favor stocks that also included movie-theater chain AMC Entertainment Holdings Inc. and American Airlines Group Inc.
“It looks like the unwind of the short squeeze, where prices will start to reflect economic reality again,” said Maarten Geerdink, head of European equities at NN Investment Partners.
Other stocks recently favored by the Reddit community are also rapidly losing air: AMC slid 25% in premarket trading and at $10 is more than 50% below last week’s intraday high. Express Inc. declined 18% and has lost about 70% of its value since peaking on Wednesday.
The declines come as short sellers reduce their interest, having sustained multi-billion dollar losses. The short interest in GameStop shares has tumbled to 39% of its freefloat, according to data from IHS Markit.