This week's staggering rally was spurred by an online campaign by pro-democracy protesters to drum up support for owner Jimmy Lai, who became the highest-profile arrest under a new national security law imposed by Beijing.
Hong Kongers have also bought hundreds of thousands of copies of the anti-government Apple Daily tabloid to protest the arrest of the media tycoon, who has since been released on bail.
Brokers said the surge in Next Digital shares was also driven by speculation Lai may sell the business.
The stock rose as much as 59.1% on Wednesday morning before reversing gains. Shares ended down 40.9% at HK$0.65, leading losses on the Hong Kong bourse.
Brokers said concerns that the Securities and Futures Commission might halt trading prompted the sell-off.
"SFC's reminder alerted day traders of the underlying risks given high volatility in such a short time," said a strategist from a local brokerage, who declined to be named.
On Wednesday, around 30% of Next Digital's trading came from investors transacting only one or two lots of 10,000 shares -- suggesting the rally has mostly been driven by retail investors.
One such investor, who only gave his last name Choi, bought one lot on Monday at HK$0.28 and said he had no plans to sell.
"I own a bit of a media company that, while I don't necessarily agree with all its reporting, at least provides another voice," he said.
The SFC late on Tuesday urged investors to exercise "extreme caution" when dealing in the stock, adding it would continue to monitor the shares.
Next Digital said on Tuesday it did not know what moved the price so much.
Wednesday's drop prompted more calls of support.
"Emergency call for yellow stock circle, 282 needs people," one post on a local pro-democracy forum said, referring to Next Digital's stock identification. Yellow is associated with the opposition in Chinese-ruled Hong Kong.
(Reporting by Donny Kwok, Clare Jim and Alun John; Editing by Emelia Sithole-Matarise)