GameStop's Stock Price Plummets as Trading Platforms Continue Restricting Purchases

GameStop's stock price has plummeted this morning, caused by a major sell-off sparked by trading [...]

GameStop's stock price has plummeted this morning, caused by a major sell-off sparked by trading restrictions on many investment platforms. GameStop's stock price has dropped by around 40% this morning, and is currently sitting at just over $200 per share as of press time. While the game retailer's stock price is still significantly higher than it was just a week ago, it's a far cry from the $346 a share GameStop was sitting at when Wall Street closed yesterday. The price dropped significantly over the morning, spurred by platforms such as Robinhood and TD Ameritrade limiting purchases of shares due to "market volatility."

GameStop's steep drop is the latest twist in the Wall Street saga surrounding the struggling game retailer. GameStop was selected, seemingly at random, as the focus of a concerted effort by individual investors on the Reddit community /r/WallStreetBets to attack hedge funds who had shorted the stock. When an investor short sells a stock, they are essentially gambling that the chosen stock's price will drop over a period of time. To short sell a stock, an investor borrows a stock from a third party and then sells it at market price. After a set period of time, the investor then purchases the same stock and returns it to its original holder, pocketing any difference between the two sales prices.

The flurry of stock purchases caused a "short squeeze," where short sellers scramble to purchase back shares thus creating additional demand and thus higher prices. That led to GameStop stock selling for as high as $480 a share and creating major windfalls for individual investors.

However, when various stock trading platforms shut down purchases of GameStop, AMC, and other so-called "meme stocks," they essentially throttled demand and created a sell-off that caused GameStop's price to plummet. The restrictions came with a heavy backlash, as thousands of users left negative reviews and a variety of pundits from across the political spectrum decried the moves as market manipulation and called for hearings and investigations. This is in addition to the White House stating they were "monitoring" the extreme rise and fall of GameStop's stock.

Not every platform has halted trading on GameStop, and /r/WallStreetBets and individual investors on Twitter and elsewhere are encouraging stockholders to "hold" and not sell their shares. As it's not even 12 PM ET, there are still several hours of trading left and it's likely that more investors will purchase GameStop stock as its price continues to drop. In the time it took to write this article, GameStop's stock jumped from $130 to $190 a share, so the volatility is likely to continue throughout the day.