GameStop short sellers lost $ 1.9 billion in just 2 days amid last stock spike

• Short sellers lost $ 664 million on Wednesday as GameStop shares climbed 104% in the last 30 minutes of trading, S3 Partners said.
• The stock’s 84% ​​intraday gain on Thursday fueled an additional $ 1.19 billion in mark-to-market losses.
• Reddit traders relaunched the GameStop rally this week on new hopes the company can reinvent itself.
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Almost a month after GameStop surged to record highs, traders on Reddit are once again increasing the stock of memes. And just like in the January rally, short sellers are suffering a lot.

Investors who sell GameStop short – betting the stock price would drop – took mark-to-market losses of $ 664 million as the games retailer’s shares climbed 104% at the close, according to the financial analysis firm S3 Partners. The stock’s 84% ​​intraday gain fueled an additional $ 1.19 billion in losses, bringing the two-day total to more than $ 1.85 billion.

Admittedly, the losses are pale compared to those fueled by the January surge. GameStop shorts are down $ 10.75 billion since the start of the year on their bearish bets, according to S3. The sum includes the intraday rally on Thursday.

GameStop first rose last month as day traders uniting in online forums like the Wall Street Bets subdirectory collected stocks in hopes of causing massive squeeze. One such technique is to push the stocks high enough to force the short sellers to cover their own positions by buying the stocks. Short buying further raises the prices and forms an upward spiral for the stock.

The Reddit-trader phenomenon faded in February as widespread selling pulled stocks from their extremely high levels. Still, a last-minute rally on Wednesday reignited the buying frenzy and prompted new calls on Wall Street Bets to drive further short squeeze.

Such a squeeze is unlikely to have caused the latest tear in the action, Ihor Dusaniwsky, general manager of predictive analytics at S3, told Insider in an email.

“While there have been buy-to-hedges caused by the large mark-to-market losses, they have been offset by new short sellers seeking to pull out of this volatile price movement,” he said. -he declares.

Shorts also have their place. The number of GameStop shares sold last week increased by 1.97 million, marking a 15% increase.

The short interest in the stock is $ 1.42 billion, or 28.4% of the company’s tradable shares. While still a significant sum, it represents a significant drop from the nearly 140% short-term interest seen earlier in 2021.

The number of stocks sold short may fall further if GameStop’s share price holds, Dusaniwsky said. The losses are already large enough to worry bearish investors, and another rally could shatter their resolve, he added.

“A lot of shorts are on the verge of being ousted and a return to the January high will certainly push a lot more shorts over the cliff,” Dusaniwsky said.

GameStop traded at $ 148.47 at 3 p.m. ET on Thursday, up 660% year-to-date.

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