A strange David and Goliath story takes place on Wall Street about the share price of a money-losing retailer for video games. An army of optimistic investors with small pockets are collecting shares of GameStop. It is in direct opposition to a group of wealthy investors who are falling on the retailer’s share price.
The result: GameStop’s share rose nearly 145% in less than two hours on Monday morning, only to return to earth to close with a modest 18% increase on the day. The shares would jump again before the start of trading on Tuesday.
Overall, the stock has risen more than 400% over the past three months – unusual for a struggling company it has lost $ 1.6 billion over the past three years. The stock fell for six consecutive years before recovering in 2020. But GameStop has been a target of many professional investors who say the company will continue with the founder as game sales continue to move online.
Investor says family is threatened
These investors bet that the stock of GameStop will fall. The short seller Andrew gave the most public expression Left of Citron Research, who said that GameStop’s shares were not worth more than $ 20 each based on sales and earnings alone. He went on to predict that the stock would fall to $ 20, even if it had climbed past the past week or so.
Left and others “shorted” the stock, meaning they borrowed and sold shares, hoping to buy it back at a cheaper price and pocket the difference. Such bets have recently been disastrous.
GameStop traded at less than $ 18 a few weeks ago. The stock rose higher after the company appointed three new directors to its board on January 11, including a co-founder of online retailer Chewy for pets to speed up the turnaround. The idea was to help the digital transformation of GameStop.
A cavalcade of smaller investors, meanwhile, spurred each other online to let the momentum of the stock fly to the moon. Many present it as a battle between ordinary people and hedge funds and other large Wall Street businesses.
In a strange twist, the normally outspoken leftist Friday said he would do it no longer comment on GameStop’s inventory and said he and his family were threatened. A Youtube video explaining why Left thought the stock would fall has been removed from the video streaming site.
Play on
It took just five days before GameStop’s shares doubled after the company announced it had revamped its board of directors. This past Friday, it rose by 51% in one day – more than the stock market has risen in more than three years. For GameStop, the 51% move was only its second best day in January.
The meteoric rise has driven some short sellers to abandon their commitment, which is done by buying shares of the stock. This helped to further accelerate its momentum. On Monday, the pressure and pull was so extreme that trading in GameStop’s stock was temporarily halted at least nine times due to volatility.
It closed at $ 76.79 on Monday after swinging between $ 65.01 and $ 159.18 earlier.
“This is quite the experience for my first month in the stock market. Hold on to infinity,” one user posted on a Reddit discussion about GameStop shares. A moment later, another user said, ‘We’re literally more powerful than the big companies. ‘
The same sentiment carried beyond internet message boards to Wall Street itself.
“As someone who started trading stocks at the university in the late ’90s, I would always remember watching the small retail groups be crushed by hedge funds and smart short sellers,” said Edward Moya, senior market analyst at OANDA. a statement said. report. “What happened to GameStop’s shares is a reminder of how times change.”
Additional reporting provided by Stephen Gandel of CBS MoneyWatch.