GameStop drops by 35% as short press conditions disappear

Shares of GameStop fell 35% on Monday before recovering from some losses as the short-pressure conditions brought about by Reddit’s day trading army began to disappear.

According to IHS Markit, the short-term stake in GameStop shares fell to 39% of the float, from 114% in mid-January. And a tweet from S3 Partners Ihor Dusaniwsky On Monday, shares that were cut short fell by 35.2 million in the past week alone.

GameStop has been big news in the markets for weeks after the stock became a target of the Wall Street Bets forum on January 11th.

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It all started after the activist investor, and Chewy, co-founder Ryan Cohen, wrote a letter to the beleagured video game retailer arguing that changes should be made and that new board members should be added to the company.

When traders on Reddit found out that GameStop had a high short interest rate and realized that they could force a short press, which skyrocketed shares.

Since then, GameStop shares have risen about 1,625% throughout January and last week alone by more than 400%.

While the move led to huge profits for WallStreetBets traders, it also caused billions in losses for short sellers and institutional investors, some of which had to be saved.

Estimates from data provider Ortex showed on Friday that short sellers in GameStop alone were sitting at a loss of about $ 19 billion in 2021. And even after Monday’s downfall, according to S3 Partners, the shorts were down about $ 13 billion in January.

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Still, the carnage for short sellers may be over, as Reddit retailers seem to have shifted their focus to silver.

Prices for the precious metal have risen, which is also causing silver workers to skyrocket.

For weeks, Reddit retailers took advantage of the huge short-term interest in GameStop by flooding the stock with new buyers, who had a short press. Now, with multiple brokers limiting trading in video game retail and lowering short-term interest rates, traders are not getting the same returns as seen over the past two weeks.

“Short press can only last as long as there is a large short position in a stock. Once it disappears, the situation changes completely,” says Matt Maley, chief market strategist at Miller Tobacco & Co.

GameStop dropped 15% on Monday to $ 274.00.