Tiffany Hagler-Geard | Bloomberg | Getty Images
GameStop stock rose 11% in premarket trading on Wednesday as the short squeeze fueled by retailers on Reddit appears to be reviving after a sharp decline.
The stock was down more than 11% on Wednesday morning but was in the black just after 5 a.m.
The stationary video game retailer’s shares rose 1,625% in January and only rose 400% last week when traders, led by the Reddit thread WallStreetBets, piled into the stock.
But the momentum had subsided earlier this week. Gamestop stock fell 60% on Tuesday and has lost more than 70% of its value since Friday.
AMC Entertainment, another sharply shortened stock that Reddit traders were also targeting, gained around 4% in premarket trading.
Robinhood and other retail apps continue to restrict purchases of a collection of stocks tracked by the Reddit thread. Many Wall Street hedge funds started short covering late last week after suffering significant losses.
Short selling is a strategy in which investors borrow shares of a stock at a certain price, with the expectation that the market value will drop below that level when it is time to pay off the borrowed shares. Buying back borrowed stocks to close out a short position, be it profit or loss, is known as short covering.