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Why Genius Brands Stock Plunged Today

By Joe Tenebruso – Jun 17, 2020 at 6:55PM

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Many traders apparently bought the rumor and sold the news.

What happened

Shares of Genius Brands International (GNUS 1.59%) declined by 19.5% on Wednesday on relatively little news. The volatile small-cap stock is prone to violent price swings both to the upside and downside, which was once again the case today.

So what

Genius Brands' stock surged ahead of the much-hyped launch of its Kartoon Channel! The free, ad-supported digital service went live on June 15 with an array of kids-focused content and broad distribution. Genius Brands has brought on some top-tier management talent to lead the initiative, and big-time stars to headline its shows.

However, after surging by an astounding 1,500% in 2020 heading up to Kartoon Channel!'s launch date, Genius Brands' shares have shed roughly 30% of their value since then. 

A stock chart that rises then falls, with a further upward move erased.

After soaring earlier in the year, Genius Brands stock has plummeted in recent days. Image source: Getty Images.

One reason that can help to explain why Genius Brands' shares were down today is that many Robinhood users appear to be exiting their positions. Genius Brands had the largest decrease in popularity among Robinhood accounts on Wednesday, according to Robintrack. 

Now what

Many traders likely purchased shares ahead of Genius Brands' heavily promoted debut of its new digital channel. Some may have decided to take profits, while others may simply be moving on to what they believe are more attractive investment opportunities.

However, rather than the day-to-day swings in its stock price, Genius Brands' long-term future will ultimately be determined by its ability to generate sustainable profits from its new growth initiatives. Whether or not it can remains to be seen.

Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Genius Brands International, Inc. Stock Quote
Genius Brands International, Inc.
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