GameStop stock drops by 40% in 25 minutes

GameStop (GME) shared soared in value Wednesday, peaking at $348 a piece, only to come crashing down minutes later to $172, losing almost half of its value. Stocks then moved back up and ended the day at $265, a 7% increase for the day as 45million shares traded hands by only 1 pm on Wall Street. The New York Stock Exchange halted the stock several times due to the volatility.

The past two days were chaotic for the video game retailer's stock since Monday when it was $136. That surge coincided with a lift to the entire stock market after Saturday's passage of the COVID relief bill in the Senate, as well as with an announcement that the video game retailer is developing a new e-commerce strategy, with Chewy.com founder Ryan Cohen heading that effort.

GameStop shares skyrocketed from less than $20 in early January to more than $480 at the end of January thanks to a successful effort by amateur traders on Reddit to crush negative bets on the company. The stock price has dropped dramatically since then.

Shares moved back up a bit in late February following news that Jim Bell, the chief financial officer, is resigning. Bell didn't leave the company willingly, according to Business Insider, and was reportedly pushed out by the board.

Senate Banking Committee held a hearing Tuesday to discuss recent GameStop volatility and the "gamification" of trading by popular investing apps like Robinhood. There are concerns that zero-commission brokers contribute to the volatility of the market and give inexperienced people access to risky trading options.

Sen. Elizabeth Warren, a Democrat, said she received responses from the Security Exchange Commission and the Financial Industry Regulatory Authority about the role hedge funds played in the GameStop stock price surge in January. One reason the Reddit community began buying the retailer's shares was due to a large number of short sells, which is a bet investors do when they think a stock will go down. Traders on Reddit bought GameStop stock and increased its share price, leading to a "short squeeze," when hedge funds that bet against the retailer were forced to buy the stock to avoid large losses. The SEC and FINRA say they are evaluating changes to the rules regarding the practice.