GameStop drops by 40% in 25 minutes

• The stock rose as high as $348.50 per share on Wednesday, topping its record closing high from Jan. 27.
• However, the shares lost all of those gains in a rapid decline around 12:30 p.m. ET.
• Trading in the stock has been halted several times due to volatility.

The GameStop story added another wild chapter on Wednesday as the retailer's stock popped 40% before quickly falling back to earth. The move appeared to be on no new headlines.

The stock rose as high as $348.50 per share on Wednesday, topping its record closing high from Jan. 27. The shares were then paused for volatility by the exchange. However, the shares lost all of those gains in a rapid decline around 12:30 p.m. ET.

The shares were last down 12% at just under $200 per share and halted once again for volatility.

The stock, which rose dramatically in January as retail traders bid up the stock to create a short squeeze, was given a boost recently when the company announced that Chewy co-founder Ryan Cohen would lead a committee to help GameStop transition to e-commerce.

GameStop was the headliner of a group of heavily shorted stocks that were targeted by retail traders on Reddit earlier this year. Short selling is a strategy in which investors borrow shares of a stock at a certain price on hopes that the market value will fall below that level. If the shares rise instead, the short sellers are forced to buy the stocks and cover their positions, creating a feedback loop known as a short squeeze.

The January surge above $300 per share for GameStop forced brokerages including Robinhood to limit trading in heavily shorted stocks, and the momentum reversed in February. The volatility has spawned a series of Congressional hearings involving Reddit and YouTube trader Keith Gill.

GameStop has remained a regular conversation on Reddit in recent weeks, with a post on Wednesday reading, "Hold GME to the moon. We're coming for $300 today."

The original short squeeze for GameStop hit several hedge funds hard, and appeared to unnerve the broader markets. Some professional investors have pointed to GameStop's volatile trading as emblematic of frothiness in parts of the market.

"I really am concerned that there's too much promotion, there's too much speculation, there's too much trading stocks as lottery tickets for companies that are far from proven," Brad Gerstner, founder and CEO of Altimeter Capital, said Wednesday CNBC's "Halftime Report." "That's never the way we try to make money. Just stay out of the way. We don't trade very much. We buy and hold for the long term."

 A GameStop spokesperson wasn't immediately available for comment.

–CNBC's Melissa Repko, Yun Li and Maggie Fitzgerald contributed to this story.

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