GameStop stock hits record high (again!) as Reddit group causes mayhem

[Pete Flint]

A hot potato: GameStop's stock spiked on Friday when hedge funds sensed a drop in stock price and attempted to "short" the market. A group of redditors bolstered enthusiasm for the stock however and forced traders to quickly buy back the stock for fear of losses, leading to a massive 69 percent rise in stock price in just one day.

Video game retailer GameStop's stock rose by nearly 70 percent on Friday causing a halt in trading. The price spike in the company’s market value was attributed in part to a group of day traders on the subreddit r/wallstreetbets, which led to a scramble by investment firms to capitalize on the pricey stocks.

Update (1/27): Craze is far from over. The virtual inflation of GameStop's stock has the company now valued at $22 billion as the share price escalated to over $320 on Wednesday. Meanwhile, the same r/wallstreetbets reddit group is now targeting other stocks like AMC Theatres and Blackberry.

Update (1/26): At the market closing Tuesday, GameStop's stock was valued at $147.98 per share, climbing 92% in a single day's trading. By most metrics, it's unsustainable and not reflecting reality, however if for any reason you owned some GameStop stock, congratulations. Time to sell.

Update (1/25): As of market opening on Monday, GameStop's stock soared again to over $115, not ceasing to amaze, even though it's clear this is the result of price manipulation.

The video game retailer's stock price is up more than 250 percent compared with this time last year following to appointment of GameStop’s newest board member, Chewy co-founder Ryan Cohen.

Hedge fund Citron Research aimed to short GameStop’s stock following Cohen’s appointment, expecting stock prices to fall, however the Reddit's traders quickly led to what is called a “short squeeze.”

For fans of the film The Big Short, it is difficult to compete with Margot Robbie market-splaining investment strategies from a bubble bath with a glass of champagne, but here is a valiant effort.

When traders sense that a company’s stock will fall, they can “short” the market by borrowing stocks from other investors and sell it at a high price. When the stock falls, they buy it back for profit. Other firms will typically see this trend and follow suit. The activity of this avid Reddit group however led to an upward trend in the stock that caused the shorts to quickly buy back their stock to make up for their losses, often to the detriment of their competitors.

Before long, GameStop’s stocks were priced at $76.76, a massive climb from the $20 price tag on January 12.

A Bloomberg article deemed GameStop the most actively-traded and most-shorted stock on the market. The stock market froze trading in GameStop multiple times due to high instability on Friday when it rose 69 percent, though it has since resumed.

When trading ceased on Friday, GameStop’s stock was up more than 50 percent within 24 hours, with a market value at $4.5 billion.

Tomorrow am at 11:30 EST Citron will livestream the 5 reasons GameStop $GME buyers at these levels are the suckers at this poker game. Stock back to $20 fast. We understand short interest better than you and will explain. Thank you to viewers for pos feedback on last live tweet

— Citron Research (@CitronResearch) January 19, 2021

Citron responded to the recent activity by warning those investing in the stock that it would soon fall back to $20, tweeting that “buyers at these levels are the suckers at this poker game.”

Permalink to story.

https://www.techspot.com/news/88390-gamestop-stock-hits-record-high-reddit-group-causes.html

 

[Uncle Al]

Hmmmm .... sounds like a new variation on the old "dead cat bounce" ..... meow!

 

[bviktor]

The big short.

 

[QuantumPhysics]

How is this place still afloat???

 

[Hexic]

Man, I love WSB. The perfect combination of 2% brilliant investors and 98% *****s, newbie investors, and trolls.

Makes for good entertainment at times.

 

[candle_86]

How is this place still afloat???

I work for GameStop we're actually doing quite well online sales have surged incredibly during covid. But you say you work for Wall Street you could look that up really really easy considering it's public knowledge

 

[mctommy]

Man, I love WSB. The perfect combination of 2% brilliant investors and 98% *****s, newbie investors, and trolls.

Makes for good entertainment at times.

Still entertaining today as it reached an intra-day high of $159! Sitting around $90, another 40%.

The big short.

Wrong. This is a short squeeze by a reddit group. Day 2.

I work for GameStop we're actually doing quite well online sales have surged incredibly during covid. But you say you work for Wall Street you could look that up really really easy considering it's public knowledge

"GameStop, which isn’t expected to turn a profit before 2023, has seen its market value triple to $4.5 billion in three weeks, burning the skeptics whose any attempt to cover is likely to further propel its ascent." Yikes!!

 

[poohbear]

I work for GameStop we're actually doing quite well online sales have surged incredibly during covid. But you say you work for Wall Street you could look that up really really easy considering it's public knowledge

I did google it, Gamestop is doing terrible and the forecast for it is dismal. The stock move is a pure momentum play like they did with Hertz back in June. Once the momentum play gets old...watch out below. Just look up the chart of Hertz's stock in June; huge run up, then a massive plummet.

 

[candle_86]

I did google it, Gamestop is doing terrible and the forecast for it is dismal. The stock move is a pure momentum play like they did with Hertz back in June. Once the momentum play gets old...watch out below. Just look up the chart of Hertz's stock in June; huge run up, then a massive plummet.

Then I suggest you Google again, it's been very well published on multiple gaming sites that thanks to covid gamestop is doing record profits on online orders both new and used.

 

[jdwii]

I actually do NOT want Gamestop to go away we have no other gaming only place to go too for console gamers. Sadly however for some reason I think of radio shack when I think of gamestop I have no idea.

 

[terzaerian]

69%

 

[poohbear]

Then I suggest you Google again, it's been very well published on multiple gaming sites that thanks to covid gamestop is doing record profits on online orders both new and used.

Look, investors don't buy a stock for where its been, or even where it's at now. They invest in a stock for where its going in the future (eg Tesla)...and gamestop is going the way of blockbuster. Oh wait, they're going digital and competing with Steam, Origin, EA, Playstation, Xbox and all the other digital delivery services? Good luck! Thats why it was the most heavily shorted stock in the market! It had an astonishing short float of over 100%...so when they targeted it, ofcourse the shorts sellers threw in the towel and a massive short squeeze happened.

 

[candle_86]

Look, investors don't buy a stock for where its been, or even where it's at now. They invest in a stock for where its going in the future (eg Tesla)...and gamestop is going the way of blockbuster. Oh wait, they're going digital and competing with Steam, Origin, EA, Playstation, Xbox and all the other digital delivery services? Good luck! Thats why it was the most heavily shorted stock in the market! It had an astonishing short float of over 100%...so when they targeted it, ofcourse the shorts sellers threw in the towel and a massive short squeeze happened.

no they're competing in the digital online sales marketplace as far as selling you physical games. They also now carry a wide arrange of retro games and consoles as well simply go to the website and look. GameStop isn't going anywhere sorry to burst your bubble.

 

[Toju Mikie]

Look, investors don't buy a stock for where its been, or even where it's at now. They invest in a stock for where its going in the future (eg Tesla)...and gamestop is going the way of blockbuster. Oh wait, they're going digital and competing with Steam, Origin, EA, Playstation, Xbox and all the other digital delivery services? Good luck! Thats why it was the most heavily shorted stock in the market! It had an astonishing short float of over 100%...so when they targeted it, ofcourse the shorts sellers threw in the towel and a massive short squeeze happened.

Blockbuster just didn't adapt when they had the chance. They had a chance to buy Netflix, but they blew it.
Gamestop's e-commerce sales rose 308% compared to last holiday season (possibly partly due to console sales). At least Gamestop is trying to adapt, which will at least lengthen, if not stop, the decline of Gamestop.
On top of that, they also started to sell PC hardware on their site, so they are not just focusing on consoles anymore.

 

[QuantumPhysics]

Gamestop is losing money. Because of Digital Downloads and DLC their business model no longer works. Not to mention Amazon's one-day delivery which is so ridiculously fast that even I'm astonished.

Shorting stocks is the opposite of buy low, sell high.

First, ‘Shorters’ sell high, by borrowing stock from shareholders and selling it. Second, they buy low, by picking up shares at a lower price and returning them to the lenders. They make money when the share price decreases.

A ‘Short Squeeze’ occurs when a stock or other asset jumps sharply higher, forcing ‘Shorters’ who had bet that its price would fall, to buy it in order to avoid even greater losses. Their scramble to buy only adds to the upward pressure on the stock's price.

Watching what’s happening with GameStop is fascinating. It has increased over 780% in the past 12 trading days from its low of just over $17, to its high of $159 yesterday. It’s increased 250% in the past 3 trading days. It’s 52 week low is $2.57.

The ‘shorts’ are getting slaughtered.

 

[mbrowne5061]

The author needs to learn what a "short squeeze" is. They happen about every decade or so (VW was the last one, in 2008, I think?). Investors shorted 140% of existing GME shares, day traders noticed and started buying shares. This caused the price to climb, forcing the short sellers to also buy shares to cover their shorts, causing the price to climb, causing the short sellers to buy, etc. And mixed in is r/wsb, also just buying shares, and then holding onto them to drive down available shares to purchase and short - driving the price even higher.

Its a feedback loop, where the short sellers need to convince the shareholders to sell to drive the price down below the short prices they set. When the market closes Friday afternoon, the shorts come due, and the short sellers will be forced to pay up to cover their short positions (even the point of bankruptcy). With 140% of GME shares shorted, there literally is not enough stock to cover all the short positions - if the price stays above $115/share, the short sellers go bust.

 

[Danny101]

I find it hilarious. The manipulators are getting manipulated themselves.

 

[Skjorn]

Don't tell people to what to do with their stocks. I'll ****ing HOLD if I want to. I LIKE THIS STOCK

 

[Philip J]

Man, I love WSB. The perfect combination of 2% brilliant investors and 98% *****s, newbie investors, and trolls.

Makes for good entertainment at times.

I find it hilarious. The manipulators are getting manipulated themselves.

In my opinion this shows the absurdity of the big Institutions who have too much control, then guys like Reddit Traders and Discreet Trader Pro come and disrupt and these manipulators run away crying, just because they've had a taste of their own medicine.

 

[Philip J]

Gamestop is losing money. Because of Digital Downloads and DLC their business model no longer works. Not to mention Amazon's one-day delivery which is so ridiculously fast that even I'm astonished.

Shorting stocks is the opposite of buy low, sell high.

First, ‘Shorters’ sell high, by borrowing stock from shareholders and selling it. Second, they buy low, by picking up shares at a lower price and returning them to the lenders. They make money when the share price decreases.

A ‘Short Squeeze’ occurs when a stock or other asset jumps sharply higher, forcing ‘Shorters’ who had bet that its price would fall, to buy it in order to avoid even greater losses. Their scramble to buy only adds to the upward pressure on the stock's price.

Watching what’s happening with GameStop is fascinating. It has increased over 780% in the past 12 trading days from its low of just over $17, to its high of $159 yesterday. It’s increased 250% in the past 3 trading days. It’s 52 week low is $2.57.

The ‘shorts’ are getting slaughtered.

Well explained. I would add that when a company shorts a stock they actually borrow that stock from somewhere so that they can short it. So it begs the question how was the short position equivalent to over 140% of the stock in existence. Seems like the institutions were up to their usual shenanigans to me.