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GameStop Corp. shares rose to their highest level in more than five years on Wednesday when short sellers struggled against the stock for exit.
Shares of Grapevine, a Texas-based video game retailer, rose 94 percent to an intraday high of $ 38.65 a share. The last time shares were traded at that level was in November 2015.
| Ticker | Safety | Last | Alter | Alter% |
|---|---|---|---|---|
| GME | GAMESTOP CORP | 31.45 | +11.51 | + 57.72% |
The rise appears to be driven by a short-lived rally arising from an agreement the company reached with activist investor RC Ventures over the addition of three board members.
According to FactSet data, short-term interest rates reached 138% of outstanding shares last month. Short sellers borrow shares to sell them with the hope of buying them back at a lower price in the future.
The new directors, including Ryan Cohen, founder of RC Ventures and online pet food provider Chewy, all have extensive experience in e-commerce, online marketing, finance and strategic planning.
RC Ventures bought 6.5 million GameStop shares in September to increase its stake to 9.98% with the aim of transforming the company into a major e-commerce player selling a wide range of fast-moving merchandise.
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The attempt to turn around GameStop’s business comes at a critical time for the company, which suffered from store closures amid the COVID-19 pandemic, at a time when more users were already buying their video games online.
GameStop reported on Monday that comparable sales for the nine weeks to January 2 increased by 4.8% over a year ago, reinforced by a 309% increase in online revenue. Total sales fell by 3.1% as the number of stores decreased by 11% during the pandemic.
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GameStop expects demand for the new Microsoft Xbox and Sony PlayStation gaming systems to increase sales through 2021 once the supply chain restrictions are eased.
Shares rose 5.89% until Tuesday this year, outperforming the S&P 500 by 1.2%.