The GameStop shares ripple is helping other stocks but for how long?

We are currently seeing increased volatility in certain stocks, including GameStop and AMC. This increases the risk of sudden, large or rapid loss and the potential for gaps, where stocks fall dramatically when the market opens. Please note that IG does not offer options on GameStop or AMC Entertainment, or the ability to short these stocks.

• GameStop price movement causes ripple effect.
• AMC and Blackberry shares spike amid ‘psychological’ movement.
• Will GameStop value continue to rise or will regulators stop Reddit pump?

Analysts have been tracking an unprecedented run for GameStop (GME.N) shares this week. Prompted by users of the WallStreetBets (WSB) sub-reddit, the rush of activity has resulted in shares moving from $39 to more than $470 in just over a week. Doug Clinton, the co-founder of Loup Ventures, has described it as an intriguing trend that’s more about humans than money.

Does the GameStop share price ripple effect make sense?

In Clinton’s view, it ‘doesn't make business sense’ but it does make sense from ‘an investor psychology standpoint’. His point is that the latest GameStop share price isn’t based on any underlying value in the company. Instead, it’s based on the attitude of investors. In this case, that’s the self-proclaimed ‘degenerate’ investors from Reddit who appear to have a vendetta against Wall Street short-sellers.

This emerging battle between business and psychology is reverberating across the markets. What’s now being described as the GameStop ripple effect is leading to upswings for other companies.

The Blackberry (BB.N) share price has jumped from $14 on 22 January to a high of $28 on 27 January. Also caught up in the buzz is AMC (AMC.N). The AMC share price has been flat since the start of 2021 due to COVID-19 restrictions keeping moviegoers out of theatres. However, following interest from WallStreetBets and a barrage of AMC logos on various social media platforms, shares spiked 300% between the 26 and 27 January.

The GameStop ripple effect is also helping unexpected targets. A small mining company from Australia saw its shares increase by 50% overnight. GME Resources (GME.AX), which trades on the Australian Securities Exchange (ASX), saw its share price increase from AU$0.075 to AU$0.10 on 28 January. Why? Because it’s ASX code (GME) matches that of GameStop. In other words, all ripples lead back to GameStop and, in turn, Reddit.

What is the ripple effect all about?

For analysts like Clinton, this is the reason business and psychology are at loggerheads. Moreover, it’s the reason we’re seeing a ripple effect. The question now is how long will GameStop shares continue surging and will other companies get caught up in the rush? WallStreetBets have shown that their fight isn’t for GameStop but against Wall Street short-sellers. This means any company the group focuses on could receive a pump. However, the movement may be coming to an end.

The White House has issued a statement saying that it is ‘monitoring the situation’. Nasdaq's chief executive Adena Friedman has also said she will ‘halt’ a stock if anonymous social media posts are fuelling ‘pump and dump’ schemes. Will more stocks become unwitting benefactors of the GameStop ripple or will the WallStreetBets movement run into an insurmountable roadblock?