GameStop shares surged again on Wednesday, as investors piled back into the ‘meme stock’ in a frenzy that triggered two trading halts late in the session.
At the end of trading, GameStop stock was up 104 percent for the day, at $91.71. It came a day after the company’s CFO resigned under pressure, but the afternoon surge baffled even fans of the stock on Reddit.
GameStop shares still remained well below their peak of $483 in January, when traders on the Reddit forum WallStreetBets fueled a buying frenzy in a bid to punish hedge funds that had bet against the stock.
CFO Jim Bell resigned on Tuesday, and although the company said his resignation was not due to any disagreement with the company, a source told Reuters that his departure was initiated by the company.
At the end of trading, GameStop stock was up 104 percent for the day, at $91.71
The source said GameStop had become dissatisfied with Bell as it works to transform into a technology-oriented business and was not confident he would be the right CFO moving forward.
Bell, who will leave the company on March 26, previously worked at brick-and-mortar retailers Gap Inc and Coldwater Creek and restaurant chain P. F. Chang’s China Bistro, according to his LinkedIn profile. He did not respond to requests for comment.
GameStop CFO Jim Bell resigned on Tuesday
Immediately after the announcement of Bell’s resignation, GameStop shares fell, suggesting that his departure was not the cause of Wednesday’s rally, which came mostly in the last hour of trading.
The stock rose so quickly in late trading on Wednesday that automatic trading pauses were triggered on the New York Stock Exchange.
It came soon after Charlie Munger, the longtime business partner of Warren Buffett, on Wednesday warned that the stock market bears signs of a bubble, reflecting a ‘dangerous’ mentality among some investors to gamble on stocks as they would horse races.
Munger, 97, lamented the recent mania for GameStop, in which amateur investors encouraged each other online to buy the gaming retailer on platforms including Robinhood, and caught some hedge funds in a short squeeze.
‘It’s really stupid to have a culture which encourages as much gambling in stocks by people who have the mindset of racetrack bettors,’ he said.
‘A lot of them crowd in to buying stocks on frenzy, frequently on credit, because they see that they’re going up, and of course that’s a very dangerous way to invest.’
Charlie Munger, the longtime business partner of Warren Buffett, on Wednesday warned that the stock market bears signs of a bubble, reflecting a ‘dangerous’ gambling mentality
‘That’s the kind of thing that can happen when you get a whole lot of people who are using liquid stock markets to gamble the way they would in betting on race horses,’ he said of the GameStop saga.
Munger said commission-free trading apps like Robinhood were partly to blame for the bubble.
‘And the frenzy is fed by people who are getting commissions and other revenues out of this new bunch of gamblers. And of course, when things get extreme, you have things like that short squeeze,’ he added.
‘And it’s really stupid to have a culture which encourages as much gambling in stocks by people who have the mindset of racetrack matters,’ said Munger. ‘It’s a dirty way of making money.’
Asked if the market resembled the late-1990s dot-com bubble, Munger said: ‘Yes, I think it must end badly, but I don’t know when.’
Munger was speaking at the annual meeting of Daily Journal Corp, the Los Angeles newspaper publisher he chairs, which was broadcast on Yahoo Finance.
He is better known as vice chairman of Buffett’s conglomerate Berkshire Hathaway Inc since 1978.
GameStop shares still remained well below their peak of $483 in January
Munger said investors should not buy gold or bitcoin, noting the latter was too volatile to become a ‘medium of exchange for the world.’
He paraphrased author Oscar Wilde’s quotation about fox hunting to describe bitcoin, calling it ‘the pursuit of the uneatable by the unspeakable.’
Munger also expressed disdain for the surging demand for special purpose acquisition companies, or SPACs, which raise money from investors and then merge with private companies to take them public, in ‘blank check’ arrangements.
‘The world would be better off without them,’ Munger said.
‘This kind of crazy speculation in enterprises not even found or picked out yet is a sign of an irritating bubble,’ he said. ‘It’s just that the investment banking profession will sell s**t as long as s**t can be sold.’