Barclays says GameStop mania is unlikely to result in broader ramifications for the market

GameStop’s (NYSE: GME) over 2000% rally has been the talk of the market in the past couple of weeks. Barclays on Friday, however, said that the short squeeze is unlikely to hold broader consequences for the market. According to Barclays:

“The ongoing short squeeze in a few stocks by retail investors has raised concerns of a broader contagion. While we believe there is more pain to come, we remain optimistic that it is likely to remain localised.”

GameStop shares opened more than 90% up at £276.83 per share on Friday but slid roughly 20% to £223 per share in the next hour. Including the price action, the stock is now trading at a per-share price of £244.54 versus a record high of £342 per share on Thursday. Learn more about stock market volatility.

In comparison, shares of the company had started the new year at £12.58. GameStop had also performed largely upbeat in the stock market last year with an annual gain of close to 250%. At the time of writing, the Grapevine-based video game, consumer electronics, and gaming merchandise retailer is valued at almost £17 billion.

SEC pledges to protect retail investors

The U.S. Securities and Exchange Commission (SEC) also expressed its commitment to protecting retail investors in a statement on Friday. The financial regulator pledged to review the market volatility and investigate actions, including restrictions, imposed by the trading platforms that might put investors at a disadvantage. As per the SEC:

“We will act to protect retail investors when the facts demonstrate abusive or manipulative trading activity that is prohibited by the federal securities laws. The Commission is working closely with our regulatory partners, both across the government and at FINRA and other self-regulatory organisations, including the stock exchanges, to ensure that regulated entities uphold their obligations to protect investors and to identify and pursue potential wrongdoing.”

Baird comments on the GameStop mania

In related news, Baird Equity Research also commented earlier this week on the unprecedented bull run in GameStop’s per-share price in January 2021 and said that the most optimistic outcome will still fail to sustain the rally or justify the stock price.  

After GameStop and AMC Entertainment, WSB investors have also started to turn to other stocks, including Lumen, Trivago, and Bed Bath & Beyond, that has so far gained 200% since the start of the new year.