GameStop Jumps 150% As Hedge Funds Hedge Short Bets, Rally Control Intensifies



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Patrick T. Fallon | Bloomberg | Getty Images

GameStop shares surged again in pre-market trading on Wednesday, continuing the streak of wild swings for the stock as several high-profile short sellers said they had retreated from their positions.

The stock traded at around $ 375 per share at 9:24 a.m. ET, up 154% in pre-market trading.

The latest upward move comes as some of GameStop’s top short sellers, including Melvin Capital and Citron, have announced that they are hedging most or all of their positions.

The stock lost some of its pre-market gains following the announcement of the short sellers, but stocks rebounded to new highs shortly before the market opened.

GameStop’s nearly vertical surge over the past week came as retail traders, many of whom documented their moves on social media site Reddit, piled into stock options and purchase. The surge in stock prices has helped create a squeeze in stocks, where brokers and options brokers are forced to buy stocks of a rising stock to cover their positions, resulting in a feedback loop that makes still ride the action.

The action appeared to get a boost in extended trading on Tuesday after Tesla CEO Elon Musk tweeted the link to the Reddit board where much of the discussion took place.

The video game retailer, which had a market cap of less than $ 4 billion at the end of last week, was the most traded stock in the market by value yesterday, according to Deutsche Bank strategist Jim Reid.

GameStop’s rapid rise drew comparisons to speculative trading during the tech bubble of the late 1990s and led many Wall Street veterans to warn investors of the potential for large losses.

Hedge fund manager Michael Burry, who said he owned 1.7 million shares at the end of September, said in a now-deleted tweet that the hike was “unnatural, senseless and dangerous.” Burry also told Bloomberg News that he does not have a long or short position in the stock.

William Galvin, Massachusetts’ leading securities regulator, told Barron’s that trading on GameStop could be “consistently wrong.”

Bank of America on Wednesday raised its share price target to just $ 10 per share, saying in a note to clients that the increase in the share price could help GameStop’s recovery plans but posed a risk for investors.

“While it’s unclear how very high short-term interest and retail ownership … could continue to exert upward pressure on equities, we believe that fundamentals will again be factored into this. evaluation, ”the note says.

The Securities and Exchange Commission declined to comment on CNBC.

– CNBC’s Michael Bloom contributed to this story.

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