GameStop Shares Soar Tenfold on Investors’ Battle With Short-Sellers
An online movement of activist traders seeking to thwart Wall Street firms has become a market phenomenon.
37-year-old US video game retailer GameStop has found itself the epicentre of a fight between established short-sellers and online traders.
GameStop, which focuses on selling physical products, has posted large annual losses as consumers have shifted towards purchasing games digitally. As a high street retailer, it was also greatly impacted by the COVID-19 pandemic, announcing mass closures of its stores in April 2020. Shares in the company dipped as low as £3.25 around this period.
However, a number of ambitious investors have taken on GameStop stock, calling for the company to move its business online and become an active competitor to the likes of Amazon.
A trading firestorm was set off last week as Citron Research founder Andrew Left, who referred to GameStop as a “failing mall-based retailer” in a report earlier this month, took to YouTube to predict that the stock would fall to $20. In response, an unprecedented number of traders on the WallStreetBets subreddit began to aggressively buy up shares in GameStop in an apparent effort to rebuke Left and others looking to short the stock.
GameStop was the most actively-traded US stock last Friday, reaching levels of volatility that forced trading to cease several times during the day. This volatility continued through the new week, reaching more than $300 per share as of Wednesday.
With the potential to make enormous losses, several firms have now closed out of their short positions, including hedge fund Melvin Capital Management. According to reporting form CNN, Andrew Left has also given up on shorting the stock, citing harassment by GameStop backers.
“As someone who started trading stocks in the late 90s in college, I would always remember watching when the small retail trading groups would get crushed by hedge funds and savvy short-sellers,” Edward Moya, senior market analyst at OANDA, said in a report. “What happened with GameStop’s stock is a reminder of how times are changing.”
The furore around the battle has attracted further investors and pushed the stock yet higher. Tesla and SpaceX CEO Elon Musk has weighed in on the topic, showing apparent support for the buyers in a tweet on Tuesday. It remains to be seen how high GameStop’s stock will rise and how long it will remain strong.