GameStop SEC investigation outed as new meme stock CLOV takes focus

GameStop has revealed that the US SEC is investigating its highly volatile stock, confirming that the retailer received an official request for documents related to the wild rise and fall of $GME this year. The shares have been a key element of the so-called "meme stock" surge in 2021, where small investors – often led in packs by Reddit groups – target otherwise nondescript stock and attempt to squeeze short holders in the process.

It's led to huge fluctuations in $GME, and the creation – and indeed destruction – of paper millionaires as the market tries to adapt. Earlier this year, popular trading platforms like Robinhood clamped down on meme stock trading, in some cases preventing customers from buying more GameStop shares.

Now, though those limits have since been lifted, the US Securities and Exchange Commission is investigating the GameStop situation as part of a broader probe into meme stock activity. While the SEC has not detailed the investigation yet, GameStop confirmed this week that it had been approached with a voluntary request for documents and other information. The company says it is complying with the request.

"On May 26, 2021, we received a request from the Staff of the SEC for the voluntary production of documents and information concerning a SEC investigation into the trading activity in our securities and the securities of other companies," GameStop said in a Form 10-Q filing this week. "We are in the process of reviewing the request and producing the requested documents and intend to cooperate fully with the SEC Staff regarding this matter. This inquiry is not expected to adversely impact us."

GameStop, for its part, has been upfront about the fact that the surges and slumps in its share price have had little to do with actual business performance or practices. In a statement this week, added to its December 2020 Class A Common Stock prospectus, the retailer highlighted that forces beyond its operations were shaping its stock.

"Our common stock has recently experienced extreme volatility in price and trading volume," GameStop acknowledged. "From January 11, 2021 to June 8, 2021, the closing price of our common stock on the NYSE ranged from as low as $19.94 to as high as $347.51 and daily trading volume ranged from approximately 1,790,000 to 197,200,000 shares. During this time, we have not experienced any material changes in our financial condition or results of operations that would explain such price volatility or trading volume."

Currently, GameStop stock is priced at just above $247 at time of publication, down over $55 since the market opened on Thursday, June 10. Meanwhile, AMC's popular share has dipped considerably since last week's highs, down $9 today, while a new meme stock contender arose, with insurance seller Clover ($CLOV) seeing a surge in interest earlier this week, though a dip again as the markets opened today.