More GameStops possible as small investors flex muscles

LOS ANGELES (AP) — GameStop and a handful of other stocks whose meteoric rise last month shocked Wall Street began falling back to Earth this week.

But the campaign that briefly pushed GameStop up by 1,600% at the expense of hedge funds that were betting it would lose value, known as “shorting,” could be a blueprint for similar efforts with other companies' shares, some analysts say.

“The cat’s out of the bag on the populism message-board trader,” said Ross Mayfield, investment strategist at Baird. “I think it will pop up again, where and when and in what (stock) I’m not sure. I do think the larger movement is here to stay.”

Some other deeply shorted stocks include Ligand Pharmaceuticals, Bed Bath & Beyond and Macerich Co.

The GameStop episode is “a wake-up call that is likely to permanently affect the business models of institutional investors,” analysts at Barclays Capital wrote in a research note this week.

It’s unclear whether the frenzy over these stocks is over, or has merely eased after Robinhood and other online brokerages restricted some types of trades in response to the overwhelming volume.

AMC Entertainment, another stock hyped by investors on Reddit and other social-media sites, declined 32% through Wednesday, while headphone maker Koss Corp. slid 60%.

GameStop's unlikely gains were the product of a tug-of-war between small investors and big institutions. Citron Research, Melvin Capital and other big hedge funds lost an estimated $5 billion betting that GameStop would fall, according to analytics firm S3 Partners last week.

Smaller investors meanwhile rallied to the stock. People on Reddit forums like WallStreetBets hyped the effort, even though individual investors could face significant losses if GameStop continues to...