Why GameStop Stock Rises Only 21%

Why GameStop Stock Rises Only 21%

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what happened

Yesterday was supposed to be a bad day for the mall-based video game retailer GameStop (NYSE: GME). In a post on Twitter, short seller Citron Research threatened to post a live video featuring the ‘5 Reasons for GameStop’. [buyers] are the strugglers at this poker game “and why GameStop shares” will quickly go up to $ 20 again. ”

However, the video did not come as promised, and GameStop did not return at all. Instead, it rose by 10%, and it still rises by 21% today from noon EST.

Glowing green stock line rises on a stock chart.

Image Source: Getty Images.

Approximately

Why is this happening? Some believe that GameStop short sellers are getting a short print – and this is probably true. However, it is also true that Citron failed to publish its live stream when it was promised, and the blame is given to ‘people who hacked Citron Twitter’ for the delay yesterday.

The video finally came out, but it was not live. In it, Andrew Left, head of Citron, set out his five reasons for selling GameStop, which basically goes like this:

  1. Although there has been a great deal of short-term interest in GameStop shares, there is a short-term push ‘because there are still many GameStop shares available to borrow and short.
  2. Hardware sales increased by 23% year on year in December, but GameStop’s sales decreased by 9%, thus losing market share to Best buy, Walmart, en Amazon.
  3. GameStop sells its EBITDA of next year 40 times, which is very expensive.
  4. A Twitter mob raises the share price, leading to the high valuation.
  5. GameStop has more than $ 1 billion in debt and is likely to sell shares to reduce its debt, diluting all who bought into GameStop.

Now what

I agree with most of these arguments – apart from the argument that there is no short press. Anyone who has sold this stock short and who bets that it will fall is probably at least a little nervous because it is getting more expensive.

As a reminder: if you sell a stock at $ 0, you earn 100%. If you are short on a stock but it is rising, your losses could be potentially infinite. Ultimately, Citron believes that GameStop is a “failed mall-based retailer” – but it is GameStop short sellers that are failing today.

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