The army of amateur traders responsible for the increase in GameStop’s stock will lose out when the share price collapses, analysts have warned.
Individuals who have invested in GameStop shares amid a frenzied bid to prevent short-sellers from profiting in the company’s collapse may end up being the ultimate casualties of a price collapse, investment analysts have told Newsweek. The warnings come as Robinhood, the trading app many individual investors used to buy the company’s stock in a bid to inflate its price and thwart the hedge funds in their bid to profit from its demise, came in for renewed scrutiny from regulators and criticism from a number of sides. Peter Hanks, a DailyFX Strategist, said the GameStop (GME) share price will likely continue its downward trajectory, in response to Robinhood and other apps delisting it yesterday, and warned that first-time investors may be left learning “harsh truths” about investing. “The next steps for GameStop’s share price are hard to predict, but with brokerages limiting, hiding or altogether disallowing their customers from the stock on their platforms, I suspect some air will be let out of the balloon over the coming days,” Hanks said. “GameStop will be an intriguing case study in the years to come and a learning lesson for many. Unfortunately I suspect some harsh truths surrounding investing and risk management will be learned by some of the newest retail traders,” he added. He warned that, as well as sustaining financial losses, traders could be turned off investing for life. “There may also be a longstanding loss of trust between retail traders and some brokerages that could turn them away from investing altogether,” he said. GameStop’s share price dropped by 44 percent from $469.42 to $132 a share in the first hour and a half of trading yesterday, after trading of the stock was suspended by Robinhood and other apps. It closed the day at $332.49 after staging a recovery, however dropped again in early trading this morning as markets reopened for the day. Many market-watchers, and bystanders drawn to the fate of the GME stock price by the David-and-Goliath nature of users of an internet board taking on the established ranks of Wall Street, will wonder whether any rally can sustain.
