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A mind-boggling David and Goliath story takes place on Wall Street about the share price of a losing money video game retailer. An army of optimistic, small-budget investors are taking over GameStop shares. This is in direct opposition to a group of wealthy investors betting on the retailer’s stock price drop.
The result: GameStop shares climbed nearly 145% in less than two hours Monday morning, coming back to earth to close with a modest gain of 18% on the day. Shares were expected to rebound again before trading began on Tuesday.
Overall, the stock has risen over 400% in the past three months – unusual for a company in difficulty which has lost $ 1.6 billion over the past three years. Its stock has fallen for six straight years before rebounding in 2020. But GameStop has been the target of many professional investors who say the company will continue to found as game sales continue to move online.
Investor says his family has been threatened
These investors are betting that GameStop’s stock will drop. The most public expression was made by short seller Andrew Left from Citron Research, who said that based on sales and profits alone, GameStop’s shares were worth no more than $ 20 each. He continued to predict that stocks would drop back down to $ 20, even though they did well above that over the past week.
Left and others “sold” the shares, which means they borrowed the shares and sold them, in the hope of buying them back at a lower price and pocketing the difference. These bets have been disastrous recently.
GameStop was trading under $ 18 a few weeks ago. Its inventory rose after the company appointed three new directors to its board, including a co-founder of online pet supplies retailer Chewy, on Jan. 11 to speed up its turnaround. The idea was that it should help GameStop’s digital transformation.
A cavalcade of small investors, meanwhile, urged online to keep the momentum going towards the moon. Many present it as a battle between ordinary people and the hedge funds and other big companies on Wall Street.
In a bizarre twist, the normally outspoken left Friday said he would more comment on GameStop’s stock, saying he and his family had been threatened. A Youtube video explaining why Left thought the stock would drop has been removed from the video streaming site.
Game enabled
It only took five days for GameStop’s action to double after the company announced its map reshuffle. Last Friday, it jumped 51% in a single day – which is more than the stock market as a whole has risen in more than three years. For GameStop, the 51% move was just its second best day in January.
The meteoric rise has caused some short sellers to break out of their bets, which is done by buying shares of the stock. This has helped to further accelerate its momentum. On Monday, the push and pull was so extreme that trading in GameStop stock was temporarily halted at least nine times for volatility.
It closed at $ 76.79 on Monday, after hovering between $ 65.01 and $ 159.18 earlier today.
“It’s quite the experience of my first month on the stock market. Hold on to infinity,” one user posted on a Reddit thread on the GameStop action. A moment later another user said, “We are literally more powerful than the big companies right now.”
This same sentiment has spread far beyond the Internet message boards to Wall Street itself.
“As someone who started trading stocks in the late 90s in college, I would always remember watching when small retail groups were crushed by hedge funds and short sellers. savvy, “said Edward Moya, senior market analyst at OANDA, in a report. “What happened with the GameStop action is a reminder of how times are changing.”
Additional reports provided by Stephen Gandel of CBS MoneyWatch.
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