What happened

The shares of online-gambling software provider GAN (NASDAQ:GAN) were down as much as 16% early Tuesday. By around 2:50 p.m. EDT today, the stock was still down 10%. Although that's a sizable loss for a single day, it comes after a series of large gains for the relatively small company, including an 18% advance on Monday. 

So what

Big moves can be both exhilarating and frightening, but the backdrop here is important. GAN first listed on the Nasdaq exchange on May 5, meaning that it's been trading for less than a month. To be fair, it was a publicly traded company in the U.K. prior to that, but it is basically a newly listed U.S. company. In the short period it has been trading on Wall Street, the stock has taken off like a rocket, peaking around an 80% gain on Monday.   

A woman at a slot machine

Image source: Getty Images

So while there wasn't any specific news out of GAN that would have precipitated a sharp decline, the company's short history in the U.S. market and swift price rise are very relevant. In fact, it's hardly shocking that the company's shares would give back some of that advance as investors lock in some of their swift gains.

Also important here is that GAN helps casino operators offer online gambling. The casino sector has been hit hard by the efforts to contain the spread of COVID-19, which ultimately led to the closure of casinos across the United States, GAN's primary market. GAN's products and services would arguably allow brick-and-mortar casinos a way around the dilemma as they seek to continue to engage with customers.

Only now that casinos are starting to reopen, the story here might not be quite as good. Bringing highly profitable physical locations back on line will likely be taking up a lot more of management's time than expanding online. And customers might prefer to visit the real deal, rather than use an online platform, at least for a little while. In other words, it's possible that the story that has gotten Wall Street interested in GAN might be changing, at least in the short term.

Now what

GAN is an interesting gambling play in that it looks to help casinos engage with their customers in a new, digital way. That could very well be a long-term growth story. But after such a swift price increase, a lot of good news seems to have been priced into the stock in a very short period of time. Today's pullback isn't shocking at all. Only more-aggressive, growth-oriented investors should be looking at this relatively tiny company (its market cap is only around $600 million even after the large price advance). 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.