A GameStop store in midtown Manhattan
Michael M. Santiago/Getty ImagesGameStop stock has lost more than half of the value seen during last month’s gravity-defying rally.
The stock fell as low as $212 Monday morning, compared with the high of $483 last month, as the shares’ wild gyrations continued, prompting a brief half in trading due to volatility. Near midday, the stock was down 17% to $270.
After a spectacular run in recent weeks, GameStop stock (ticker: GME) has become known not mainly as an embattled retailer struggling to turn things around in an changing industry, but as a story of retail traders getting the better of short sellers. The stock was trading at about $18 before it took off last month.
Short interest—the amount of stock investors have borrowed and sold in hopes of buying it back later at a lower price—is now $8.82 billion, or 53% of shares available for trading, Ihor Dusaniwsky, a managing director at S3 Partners, a short-selling analytics firm, tells Barron’s. He notes that shares shorted declined 56% over the last week, implying many short sellers have exited their positions.
“While long shareholders are looking at significant mark-to-market gains, shorts are now down -$13.38 billion in year-to-date mark-to-market losses,” he wrote. “Both fundamental and momentum short sellers have found opportunities and price exit points to trim their positions in the face of these losses as the GME short squeeze is in full force.”
Risky options bets and demand driven by some closing out those bearish positions have pushed the stock higher, and demand from retail and momentum traders has amplified the moves. Melvin Capital, which was founded by former SAC Capital portfolio manager Gabe Plotkin, lost 58% in January from investments that included a bet against GameStop, according to a report from The Wall Street Journal.
GameStop stock is hugely popular among users of Reddit’s WallStreetBets forum, who bought the shares reasoning that short sellers had bet so heavily against the company that it was vulnerable to a so-called short squeeze.
They have been proven correct, but the upsurge they have triggered won’t last forever. Experts note that the short squeeze won’t fundamentally change GameStop’s trajectory, though it could create staggering short-term gains for those who time it well. In addition to those who bought the stock early, the shares have also attracted interest from inexperienced traders who may turn out to have bought too late, and be left holding the bag.
The mean among Wall Street’s targets for the stock price is $13.44, according to FactSet, implying that analysts following the company closely don’t see recent levels as anywhere near sustainable.
Write to Connor Smith at connor.smith@barrons.com
February 02, 2021 at 12:20AM
https://www.barrons.com/articles/gamestop-stock-is-down-hard-in-the-latest-wild-swing-51612197472
GameStop Stock Swings Wildly Again. Monday's Move Is Down, Hard. - Barron's
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