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The actions of GameStop Corp. climbed to their highest level in more than five years on Wednesday as short sellers betting against the action rushed for the exit.
Shares of the Grapevine, Texas-based video game retailer jumped 94% to an intraday high of $ 38.65 each before settling at $ 31.40. The last time stocks traded at this level was in November 2015.
| Teleprinter | security | Latest | Change | Change% |
|---|---|---|---|---|
| GME | GAMESTOP CORP | 31.45 | +11.51 | + 57.72% |
The spike appears to be due to a short-lived rally sparked by a deal the company has made with activist investor RC Ventures to add three board members.
Short-term interest last month reached 138% of shares outstanding, according to FactSet data. Short sellers borrow stocks and resell them in the hope of buying them back at a lower price in the future.
The new directors, including Ryan Cohen, founder of RC Ventures and online pet food supplier Chewy, all have extensive experience in e-commerce, online marketing, finance and strategic planning.
RC Ventures bought 6.5 million GameStop shares in September to increase its stake to 9.98% with the aim of transforming the company into a major ecommerce player that sells a wide variety of merchandise with fast shipping.
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The attempt to turn GameStop’s business around comes at a critical time for the company, which has suffered from store closures amid the COVID-19 pandemic at a time when more and more users were already purchasing their video games online.
GameStop reported on Monday that comparable sales for the nine weeks through Jan. 2 were up 4.8% from a year ago, supported by a 309% increase in online revenue. Total sales fell 3.1%, as the number of store locations declined 11% during the pandemic.
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GameStop expects demand for the new Microsoft Xbox and Sony PlayStation gaming systems to drive sales through 2021 once supply chain constraints ease.
Stocks rose 5.89% this year through Tuesday, outperforming the S&P 500’s 1.2% gain.
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